Just the Tip:
If picking investments is what’s kept you from starting, open a robo-advisor account. You answer a few questions about your goal and timeline, and it builds a diversified portfolio of index funds, then rebalances it for you. Schedule an automatic deposit for the day after payday, and investing happens without another decision.
A brokerage account opens in minutes. What keeps people out of the market is everything after that: picking funds, choosing a mix of stocks and bonds, rebalancing as prices move, and holding steady when prices fall.
A robo-advisor makes those calls once, at signup, based on your goal, your timeline, and how much of a drop you can sit through. After that it invests each deposit, reinvests dividends, and rebalances when the mix drifts. When prices fall, the plan keeps buying unless you stop it.
That automation is cheap. Wealthfront charges 0.25% of your balance a year, $25 on $10,000, on top of the funds’ own costs. Fidelity Go charges no advisory fee on balances under $25,000 and needs only $10 to start investing.
Check how the fee works at your balance before you sign up, because a flat fee hits small accounts hardest. Betterment charges $5 a month until you have $24,000 invested or recurring deposits of at least $200 a month, and 0.25% a year after that. On a $1,000 balance with no recurring deposit, that’s $60 a year, 6% of the account.
Then open the account type that fits the goal and automate it. Use a Roth IRA for retirement money if your income qualifies, since its growth comes out tax-free in retirement. Use a regular taxable account for anything you’ll need sooner. Set the recurring transfer to run the day after payday, so the money moves before you can spend it.
Revisit the fee once your balance is big enough to notice it. At $100,000, a 0.25% fee is $250 a year before fund costs. Vanguard’s target-date index funds average 0.08% a year, about $80 at that balance, and rebalance themselves. Until then, paying a robo-advisor to run the plan beats another year of deciding.
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