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Bottom Line Up Front

  • A robo-advisor provides investment recommendations based on your specific financial situation and preferences.
  • Robo-advisors generally have lower fees than traditional investment advisors and work well for both new investors and seasoned pros.
  • Some robo-advisors offer a fully automated process where you tell them your goals, risk tolerance and time horizon, and they build and manage your portfolio for you.

Time to Read

3 minutes

November 28, 2023

Lots of people will tell you that investing in the stock market may be one of the fastest ways to grow your money. It has the potential to earn you more on your investing dollars long-term than other types of accounts. But, some people are afraid to lose money or worry they don’t know enough to be successful. Plus, some potential investors are hesitant because it can take a lot of effort to research and track investments. And, knowing when it’s most advantageous to buy and sell isn’t an exact science. There’s a way to overcome these concerns. Enter robo-advisors. 

How does a robo-advisor work?

Some people refer to automated online investing systems as robo-advisors. Generally, these are online tools that provide automated investing advice and portfolio management. They use complex mathematical algorithms to compare your finances, goals, risk tolerance and time horizon against market conditions to make investing recommendations. In other words, they do the hard work for you. Think of it as a lower-stress, lower-cost way for investors to invest with confidence. And, they’re not just for newbies. Even seasoned investors have seen the benefits of using an automated service.

There are many types available—each with a slightly different way of operating. Some make researching, buying and selling securities easier. Others offer pre-built bundles and some are fully automated. That means that once you tell them your goals, risk tolerance and financial situation, they do the rest. It’s a great midpoint between doing it yourself and using a human investment advisor.

The thing they all have in common is they simplify the investing process. They analyze each investor’s specific situation and compare it to market conditions. Then, they suggest a suitable asset allocation and recommend an investment portfolio tailored to that investor's preferences and needs. Some even rebalance your portfolio for you periodically. Put simply? A robo-advisor gives advice on how to invest your money in a way that makes sense for you. 

What are the benefits of a robo-advisor?

It’s easy to see their appeal. With a robo-advisor, you don’t have to know everything about investing. The technology process makes investing simpler. And, they provide some investing safeguards. Basically, they’re a cost-effective, technology-driven investment solution.

  • Convenient. You’ll have access to investment advice and portfolio management anytime and from anywhere.
  • Cost-effective. Their fees are usually lower compared to traditional human advisors. So, professional investment advice is more affordable and available to more people.
  • Transparent and Objective. These systems work from measurable facts and inputs. So, they’re generally less likely to include human bias when recommending a portfolio.
  • Automated and Efficient. Since they automate things like portfolio management and rebalancing, there’s no need for time-consuming research and tracking.
  • Manages Risk. To minimize risk, they analyze an investor's overall profile with complex algorithms. The result is a diversified asset allocation strategy.

How can I get started investing?

Navy Federal Investment Services has options that fit all kinds of investing styles. Our dedicated financial advisors are available to help you map out an investment strategy that fits with your goals, finances and risk tolerance.

We also offer a low-cost online investing tool exclusively for Navy Federal members. You can buy some stocks/exchange-traded funds (ETFs) for as little as $1, and the first 30 days won’t cost you a cent. Whether you’re interested in having us do the work for you or you prefer to manage your investments yourself, Digital Investor gives you choices:

  • Automated Investing. You tell us about your finances, goals and risk tolerance, and we’ll do the rest. We’ll build and manage your portfolio for you. Plus, we’ll automatically rebalance it at least quarterly, so you can relax.
  • Self-Directed Investing. Prefer to be more hands-on? You can pick your own securities and manage your portfolio directly. We make it simpler to quickly and easily research, buy and track your assets. You can also use one of our pre-built bundles.

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Navy Federal Financial Group, LLC (NFFG) is a licensed insurance agency. Non-deposit investments, brokerage, and advisory products are only sold through Navy Federal Investment Services, LLC (NFIS), a member of FINRA/SIPC and an SEC registered investment advisory firm. NFIS is a wholly owned subsidiary of NFFG. Insurance products are offered through NFFG and NFIS. These products are not NCUA/NCUSIF or otherwise federally insured, are not guaranteed or obligations of Navy Federal Credit Union (NFCU), are not offered, recommended, sanctioned, or encouraged by the federal government, and may involve investment risk, including possible loss of principal. Deposit products and related services are provided by NFCU. Digital Investor offered through NFIS. Financial Advisors are employees of NFFG and they are employees and registered representatives of NFIS. NFIS and NFFG are affiliated companies under the common control of NFCU. Call 1-877-221-8108 for further information.

This content is intended to provide general information and shouldn't be considered legal, tax or financial advice. It's always a good idea to consult a tax or financial advisor for specific information on how certain laws apply to your situation and about your individual financial situation.