The best Robo Advisors for small or young investors should not only focus on having the lowest minimum deposit, but you should look for a service that also offers low (or no) fees and account services for smaller investment amounts.
It doesn’t matter if you have huge chunks to invest or need to start small; if you’re considering a Robo Advisor, you need to make sure that you’re getting the best value for your money. This is even more important when you’re starting small.
When looking for Robo Advisors that are ideal for young investors or people with smaller amounts to invest, we focused on the following key factors:
- Low minimum deposit
- Low or no management fees
- Features available for lower investment amounts
M1 Finance started in 2014 and quickly became the Robo Advisor of choice for both new and seasoned investors. M1 Finance has zero fees for pretty much everything and makes their money from optional account extras like a “Plus” membership and interest rates on borrowed money (and even those are low.)
You’ll love the “pie” investment templates that only M1 Finance offers. Each slice of the pie represents your various investments. You can choose from many pre-built pies, or you can customize your own. The pies make it easy to view the investment allocations with a single glance. The service also comes with a great smartphone app so you can check the status and change the allocations of your investments on the go.
M1 Finance also gives you access to all the usual account types, including IRAs and trusts, and most importantly, easy access to SRI-based portfolios. M1 Finance gives socially responsible investors a way to easily and quickly build a portfolio around what matters to them.
Wealthfront is now one of the biggest and best robo-advisors in the world. According to their founder, Daniel Carroll, they increased their assets under management by 100% in 2019, from $10B to $20B.
Wealthfront charges a 0.25% management fee, but you can invest up to $5,000 for free when you sign up with our link.
Wealthfront has developed software that manages your investments for you. You will build a custom diversified portfolio of low-cost ETFs and open a variety of account types for retirement, education, and everything else.
Wealthfront offers tax-loss harvesting for every member, which lowers your tax bill while maintaining your investment strategy. They also offer a personal finance dashboard that helps you manage your financial accounts in other banks and investment platforms, including other robo advisors.
You can also earn 0.10% APY on the money you save in a Wealthfront Cash Account, which is significantly higher than the 0.06% national average.
Wealthsimple is fully automated and easy to use. The Robo Advisor comes with a $0 account minimum and will offer free portfolio rebalancing and tax loss harvesting for all accounts.
If you sign up to Wealthsimple using our link, they will manage your first $10,000 investment for free, for one year. There’s no catch; sign up using our link, and your first $10,000 investment will be managed free of charge!
Wealthsimple is a traditional Robo Advisor. It offers the usual SEP IRA, traditional IRA, Roth IRA, and Rollover IRA accounts. But it also offers halal-based investing opportunities along with socially conscious or green stocks. The Wealthsimple Basic service will charge zero advisory fees for the first year and only costs you 0.50% for accounts below $100,000.
Although Wealthsimple is not intended for hands-on investors, it remains a solid choice in eco-friendly investing.
MINIMUM DEPOSITS AND ADDITIONAL ACCOUNT CHARGES
If you’re thinking about starting small, the first thing you need to consider is the minimum deposit required by the Robo Advisor. If you don’t meet the required minimum deposit, then you’ll be unable to open an account in the first place.
Most robo advisors require a minimum deposit, and the amount can range from a few hundred to tens of thousands of dollars. In order to find the best service for you, you’ll definitely need to consider this.
The good news is that there are robo advisors with no minimum deposit requirements, which is ideal for small investors. However, the service might add additional account charges if the required monthly contribution to the investment account is not met.
The level of management fees applied is always an important issue to consider, and it becomes even more so when your total investment amount is at a lower level. That means you need to look carefully at how these management fees are charged before signing up.
Most robo advisors charge management fees as a percentage of the total investment amount, so it’s ideal to find a Robo Advisor with a low percentage rate. There are also those that charge a fixed monthly or annual fee (rather than being based as a percentage), and this could work out to be cheaper in the long run but is usually best for larger investors.
Some services only begin charging a fee once you hit a certain level of the account balance. This is ideal for smaller investment amounts since you can begin investing in a robo advisor for no fee at all. We highlighted some of these services on this page.
ACCOUNT SERVICES AVAILABLE
When you’re trying to make the most out of a comparatively small investment amount, the management fees and charges are not the only things you should be concerned about. Sometimes robo advisors with the lowest fees can also ome with fewer features or account services.
If you’re an investor with a lower amount to invest, you need to choose a Robo Advisor that offers bread-and-butter services such as portfolio rebalancing and dividend reinvestment. Some more advanced features such as tax loss harvesting and the ability to trade individual securities are often only available for larger account balances. We took all of these into account in our recommendations on this page, however, you should look into which services you really need before signing up.