Table of Contents
Automated investing platforms, sometimes called robo advisors, rely on sophisticated computer algorithms to recommend pre-set investment portfolios to individual investors based on their goals, time horizon, and risk profile. These services tend to feature lower fees, lower minimum balance requirements, and a more hands-off approach to investing.
A growing number of investors worldwide find automated strategies appealing, with the market share of these platforms increasing to $14.08 billion in 2026, up from nearly $11 billion in 2024.
In addition, investors have shown interest in hybrid strategies, which combine traditional computer-generated portfolio suggestions with human guidance.
Automated investing platforms tend to offer lower fees, lower minimum balance requirements, and streamlined digital access. Automated investing may reduce the learning curve for some investors entering the financial markets, helping them start building and managing a portfolio to achieve their financial goals.
Key Points
• Automated investing uses algorithms to recommend pre-set portfolio options for investors.
• Lower fees and minimum balances make automated investing accessible for beginners.
• Platforms collect data on an individual’s financial situation, risk tolerance, and goals when offering a preset portfolio.
• Globally, assets in robo platforms continue to grow, with hybrid strategies also showing a growing appeal.
• Drawbacks include limited human interaction and potential exposure to market volatility.
Automated Investing: A Primer
There are several reasons why investors might choose automated investing platforms to help them manage an investment portfolio.
Automated investing uses computer algorithms to select and trade stocks, exchange-traded funds (ETFs), or other assets, often without the need for oversight by a human financial advisor.
Automated investing has changed the financial advisory game in fundamental ways. Like so much else that has happened during the digital revolution, automated investing uses a form of artificial intelligence to deliver a streamlined approach to basic portfolio management.
But it’s interesting to note that a growing number of platforms now also offer hybrid options that include automated portfolio management, as well as input from a human advisor.
The Automated Investing Process
Investors who sign up for an automated investing platform usually start by filling out a short questionnaire, which collects information about an investor’s financial situation, risk tolerance, and goals.
The robo advisor then uses this data to recommend an investment portfolio to the client that may help them meet their financial goals. Based on the investor’s input, the automated investing platform will recommend and manage this pre-determined portfolio for the investor using computer algorithms and other data.
Automated investing advisors may also handle portfolio rebalancing and tax-loss harvesting if the client chooses these services. (SoFi’s automated portfolio includes the above features, but not automated tax-loss harvesting.)
Most automated advisors use Modern Portfolio Theory (MPT) to create and manage a portfolio’s asset allocation. The idea is to decrease risk by diversifying a portfolio into many assets and not “put all your eggs in one basket.”
Automated Investing and Retirement
In addition, most automated investing platforms offer the opportunity to open an IRA, a step that can help simplify the process of saving and investing for retirement for many investors.
Similarly, some workplace 401(k) plans may offer automated portfolio options within the existing plan.
Automated Investing vs Robo Advisors
Automated investing tools are often referred to as robo advisors. Investors may see the terms automated investing and robo-advisors used interchangeably to describe digital tools that use computer algorithms to manage a financial portfolio.
In reality, though, automated investing is a broader term that can refer to several aspects of today’s financial products and features: something to bear in mind when investing online or through a traditional brokerage.
• Using automatic transfers and contributions to investment portfolios and retirement plans is a form of automated investing.
• Target date funds, a type of mutual fund that rebalances over time to become less conservatively invested, uses a form of automated investing known as a glide path.
Want to start investing?
SoFi’s robo-advisor can offer a portfolio that may suit
your needs and risk level.
Why People Choose an Automated Investing Strategy
There are several reasons why investors choose automated investing tools to help them manage an investment portfolio.
Comparing Investment Costs
Automated investing advising generally costs less than traditional financial advisors. The reason the cost of automated advising is lower is because it relies on an algorithm, while the guidance of a live person can cost more.
Automated investment fees are usually a percentage of the assets under management (AUM). Typical fees are less than 0.5% of AUM annually. So if an investor puts $10,000 into an automated investing service, they generally pay less than $50 per year.
By comparison, a reasonable rate for a human financial advisor would be a 1% investment fee. On a $10,000 investment, that’s $100 per year just for the advisory fee. Investors may also have to pay fees on their investments and commissions for products the financial advisor sells.
Recommended: Robo-Advisor vs. Financial Advisor: Which Should You Choose?
Automated Platform Fees
However, automated investing services have additional fees as well. Robo-advisors charge a brokerage fee, and the ETFs themselves typically generate management fees, taxes, and other costs for which the consumer is responsible.
Like many investment costs, however, these fees can be hard to track as they may simply be deducted from investor returns. That’s why it’s important to look beneath the hood, so to say, of any investment product to learn the exact costs.
More Affordable Initial Investment
Many automated investing platforms also have low minimum account requirements. And some platforms have no minimum initial investment requirements, but they may require regular deposits.
In contrast, some human financial advisors require clients to meet minimum investment levels. At the high end, private wealth managers could require minimum account balances in the millions.
Because of the lower initial investment required, younger consumers have turned to automated investing in planning for their financial future. Previously, high minimum balances had been headwinds to younger investors, preventing them from getting financial advice.
As younger investors, like Generation Z and millennials, start hitting life milestones like getting married and saving for a house, automated investing may be a good option for them to begin building wealth.
Efficient & Convenient Access
With traditional financial advisors, clients had limited access and had to work around the advisor’s schedule. Automated advisors use digital platforms. This allows clients to ask questions and access help 24 hours, seven days a week, if needed.
Need to make a trade or a change? There is no need to call to schedule an appointment, fill out a physical form, or wait for office hours. Usually, it’s possible to manage your automated portfolio from the platform or app.
Lower fees and minimum balances have attracted younger investors to the automated investing industry. But the digital and mobile platforms these services offer have also made younger users turn to such automated services more.
Recommended: How Much Does a Financial Advisor Cost?
Concerns About Automated Investing Services
Robo advisors do come with some downsides, however.
Limited Human Interaction
While a growing number of automated services now offer hybrid services that provide investors with the ability to contact a live advisor or representative, not all of them do. Typically, your access may depend on how much money you have invested.
In any case, if you have pressing questions or an investing dilemma, it’s likely it will be up to you to figure out the right steps to take.
Not Fully Customizable
It’s true that a robo-advisor is designed to offer a range of pre-set portfolios, one of which will hopefully meet an investor’s needs. But automated platforms don’t have the flexibility to offer each person a fully customizable portfolio — for that they would need to craft their own or work with a professional.
By the same token, if your personal circumstances changed in such a way that your investment strategy also shifted, it’s unlikely that you’d be able to adjust an automated portfolio except in terms of its basic asset allocation.
Risks and Costs of ETFs
Most robo advisors use a mix of ETFs and low-cost index funds. ETFs hold a basket of stocks or bonds and the vast majority of these funds are passively managed, i.e. they are built to mirror an index, such as the S&P 500. ETFs differ from index mutual funds in that they are traded throughout the day on an exchange, similar to stocks.
ETFs come with certain risk factors. Because ETF shares are traded throughout the day, they’re bought and sold at the market price, which may or may not reflect the fund’s net asset value or NAV. Thus, an ETF’s performance is subject to market volatility. In addition there can be tax consequences, owing to the trading of shares.
What to Look for in an Automated Investment Platform
If you’re interested in opening an automated investing account, there are several factors you may want to consider before deciding if automating investing is right for you.
Automated Investing Fees
As mentioned above, automated investing fees are generally lower than traditional financial advisors. However, you still want to compare the fees of the various automated investing platforms on the market.
Some platforms charge a flat fee, while others charge a percentage of your assets under management. In addition, some platforms charge fees for specific services, such as tax preparation or additional investment advice.
Note that the fee to use the automated service typically does not include investment fees.
Affordability and Accessibility
Some automated investment platforms require a minimum investment to open an account, or they may require a regular deposit amount (or there may be other requirements). Be sure to understand the terms when signing up.
Investment Options
The investment options offered by automated investment platforms vary. Some platforms offer a limited selection of investment options, while others offer a wide range of investments. You want to ensure the automated investing platform you choose offers investment options that meet your needs.
Usually, robo-advisors invest in ETFs and mutual funds, so you’ll want to see if the services offer a range of funds, from international equities to domestic corporate bonds. Knowing what investment options a robo-advisor provides can help you ensure that you end up with a diversified portfolio that aligns with your goals.
Investment Rebalancing
Generally, a robo-advisor will make automated investments based on your risk tolerance and financial goals. These services will create a portfolio that typically includes an assortment of ETFs. It’s usually a good idea to verify whether the automated investing services will rebalance your portfolio to maintain that percentage of stocks and bonds.
For example, an investor with a more aggressive risk tolerance may have a portfolio with an asset allocation of 80% stocks and 20% bonds. With time, the allocation will likely shift. An automated investor can automatically rebalance your account to its original 80/20 ratio.
No human interaction is needed; the rebalance happens through the automated investing algorithm. At the same time, automated portfolios may enable individual investors to adjust the allocation over time, as their circumstances change.
Human Interaction
Some automated investing services may give investors access to human financial professionals, a hybrid approach which can be helpful for investors who need to ask questions, discuss goals, and plan for the future.
Automated investing services might charge more for this service, but it could be helpful to have this option.
Who Might Want to Consider Auto Investing?
Automated investing may be an option for people who want to invest for the long term but do not want to manage their own portfolios or pay high fees for a traditional financial advisor. It can also be an option for people who want to invest in various asset classes, but don’t have the time or expertise to do so themselves.
That doesn’t mean auto investing is right for everyone. For those who aren’t particularly tech savvy or comfortable with automated platforms, using a robo advisor might not make sense. Again, it’s important to be comfortable with the investments offered in these pre-determined portfolios, as well as the risks and costs associated with these products.
As noted above, many younger investors have begun using robo advisors to create portfolios and make automated investment decisions. This may allow younger investors to build up experience in the financial markets while using a pre-set portfolio. As they build wealth and expertise, younger investors may decide to make investment decisions on their own or hire a traditional financial advisor to help manage their financial goals.
The Takeaway
An automated investing platform may suit some investors, particularly in terms of the overall affordability and convenience robo advisors can offer, as well as the potential to avoid human errors.
In addition, automated investing allows investors to use a hands-off approach, which many people may prefer over the time-consuming research and management required for picking and choosing stocks, bonds, and other assets to build and manage a self-directed portfolio.
Ready to start investing toward your future, but want some help? You might consider opening an automated investing account with SoFi. Whether you're interested in investments for your traditional brokerage or IRA account, you can access personalized, expert-curated recommendations and automatic monitoring, trading, and rebalancing. With a robo advisor from SoFi Wealth, you'll get a professionally managed portfolio aligned with your goals.
FAQ
Is a robo advisor different from an automated investing platform?
No, these two terms refer to the same type of service: an automated platform that takes individual information and recommends pre-set portfolio options generated and managed by sophisticated algorithms.
Is automated investing smart?
For many people, automated investing offers a low-cost way to save and invest for important goals like retirement without having to do a lot of heavy lifting on their own. That hands-off approach appeals to certain people, but may not be right for everyone.
Are automated investing platforms legit?
Yes. Similar to human advisors, automated investing tools have to register with the Securities and Exchange Commission. These platforms are also subject to the same securities regulations as regular (non-automated) broker-dealers.
How much does automated investing cost?
These days, there is a wide range of platforms, each offering different costs and fee categories. What investors may want to ask when comparing automated platforms is what the annual fee is (if any); what the minimum balance requirement is; and what the portfolio investment fees might be.
Photo credit: iStock/gorodenkoff
INVESTMENTS ARE NOT FDIC INSURED • ARE NOT BANK GUARANTEED • MAY LOSE VALUE
For disclosures on SoFi Invest platforms visit SoFi.com/legal. For a full listing of the fees associated with Sofi Invest please view our fee schedule.
Tax Information: This article provides general background information only and is not intended to serve as legal or tax advice or as a substitute for legal counsel. You should consult your own attorney and/or tax advisor if you have a question requiring legal or tax advice.
S&P 500 Index: The S&P 500 Index is a market-capitalization-weighted index of 500 leading publicly traded companies in the U.S. It is not an investment product, but a measure of U.S. equity performance. Historical performance of the S&P 500 Index does not guarantee similar results in the future. The historical return of the S&P 500 Index shown does not include the reinvestment of dividends or account for investment fees, expenses, or taxes, which would reduce actual returns. Third Party Trademarks: Certified Financial Planner Board of Standards Center for Financial Planning, Inc. owns and licenses the certification marks CFP®, CERTIFIED FINANCIAL PLANNER®
Exchange Traded Funds (ETFs): Before investing in Exchange Traded Funds (ETF), always read the fund's prospectus. It contains important information about the fund’s objectives, risks, and fees. You can get a prospectus from the fund company’s website or by emailing our customer service at [email protected].
Fund Fees
If you purchase investment funds, including Exchange Traded Funds (ETFs), through SoFi Invest, either on your own or with automated investing, the funds have their own management fees. These fees are paid by the fund itself, not directly by you and can reduce the fund's returns. More detailed information about a fund's fees can be found in its prospectus.
SoFi Invest and its affiliates do not receive sales commissions or other fees from the ETFs it invests in on your behalf, but may earn management fees if SoFi Invest creates its own fund(s). SoFi may waive or change its fees at any time. The most current fee schedule is available in your Account Documents within the SoFi app or online account.
Mutual Funds (MFs): Investors should read and carefully consider the information contained in the prospectus, which contains the Mutual Fund’s investment objectives, risks, charges, expenses, and other relevant information. You may obtain a prospectus from the Fund company’s website or SoFi's customer service at: 1.855.456.7634. Mutual Funds must be bought and sold at NAV (Net Asset Value); unless otherwise noted in the prospectus, trades are only done once per day after the markets close. Investment returns are subject to risks. Shares may be worth more or less their original value when redeemed. The diversification of a mutual fund will not protect against loss. A mutual fund may not achieve its stated investment objective. Rebalancing and other activities within the fund may have tax implications.
Investment Risk: Diversification can help reduce some investment risk, but cannot guarantee profit nor fully protect in a down market.
Disclaimer: The projections or other information regarding the likelihood of various investment outcomes are hypothetical in nature, do not reflect actual investment results, and are not guarantees of future results.
SOIN-Q326-022