Robo advisors have become popular options for investors. They use tools to automatically, effortlessly manage and help diversify your investment portfolio - no human interaction required. And while this kind of automation makes them cheaper than a traditional financial advisor, that doesn't mean they're free.
Robo advisors from the likes of Investsmart, stockpot and iRobo can be a great way to build a simple, beginner's investment portfolio. But Investor Junkie ran an interesting article on the annual fees of robo advisors, featuring three of the most popular ones in the US - Charles Schwab, Betterment and Wealthfront.
The goal was to reveal the total annual cost of using each of these services. To calculate this, they added up the expense ratio for the advisors themselves, the expense ratios of the funds they choose and their annual fees. Then, they compared them at four different investment amounts - $5000, $35,000, $125,000, and $500,000. Here's what they found with a $35,000 investment:
Keep in mind -- this is just a rough, overall look at the annual cost. It doesn't consider which firm has the better portfolio for your money, because there are too many variables that go into that.
Their overall point is to realise the real annual cost you pay. Really, this cautionary advice goes with any type of investing, but it may be easy to underestimate the cost of an automatic robo advisor.
To check out the full post and the rest of the calculations, head to the link below.
The True Costs of Robo Advisors -- What Are the Annual Fees? [InvestorJunkie]