BENEFIT FROM A TAILORED PORTFOLIO

Robo-advisers use an online sign-up process to gauge an investor’s risk tolerance by feeding information such as their age, income, saving goals and investment history into an algorithm, which then assigns them an investment portfolio, ranging from conservative to higher-risk ones.

These portfolios are made up of ETFs with exposure to indices such as US and global equities, fixed-income products such as bonds, though exposure to real estate, commodities or gold is also possible. Investing in ETFs allows robo-advisers to offer fees far lower than traditional investments, such as actively managed mutual funds bought through a bank or broker.

Investors can buy ETFs directly via a brokerage, but with robo-advisers they benefit from portfolios matched to their risk tolerance as well as being user friendly. Many robo-advisers charge what are called wrap fees; there are no additional fees such as subscription or withdrawal fees, or fees for rebalancing.