How to Use a Robo-Advisor to Grow Your Wealth

August 12, 2025 Carlos Eduardo

A young investor uses an online robo-advisor platform on her laptop. Robo-advisors are automated investment services (digital financial advisors) that use computer algorithms to build and manage your portfolionerdwallet.com investopedia.com. By answering a few simple questions about your goals and risk tolerance, a robo-advisor will recommend and maintain a diversified mix of low-cost funds for you. This hands-off approach makes investing accessible to beginners and busy people alike. You don’t need to know which stocks to buy or when to sell – the robo-advisor’s software handles the details.

Because these platforms run on software, they can keep fees very low. Many robo-advisors charge around 0.25% per year in management feesinvestor.vanguard.com nerdwallet.com. That means on a $10,000 account you might pay only about $25 a year, far less than a typical human advisor. Lower fees and account minimums mean more of your money stays invested. In fact, Vanguard reports that most digital advisors charge a median fee of just 0.25%investor.vanguard.com, and many let you start with just a few dollars (some have no minimum at all)nerdwallet.com investopedia.com.

These advantages – low cost, low minimums, and automation – can turbocharge your wealth-building. For example, even a modest monthly contribution can compound nicely over time. Assuming a 4–5% average annual return (typical for balanced portfoliosinvestor.vanguard.com), investing $100 per month can grow to around $80,000 in 20 years. Doubling contributions or extending the time horizon can roughly triple the final amount, illustrating how consistency and compounding work in your favor. No wonder robo-advisors now manage nearly a trillion dollars worldwidefinancialplanningassociation.org – a sign that many investors trust them to build wealth.

What Is a Robo-Advisor?

A robo-advisor is essentially an automated, online financial advisor. It’s a digital platform that uses computer algorithms to manage your investments for younerdwallet.com marcus.com. You’ll fill out an online questionnaire about your financial goals, time horizon, and how much risk you’re comfortable withnerdwallet.com marcus.com. Based on your answers, the robo-advisor software creates a tailored portfolio of index funds or ETFs – baskets of stocks and bonds designed to track the marketnerdwallet.com investopedia.com.

Because everything is handled digitally, a robo-advisor can offer “affordable digital financial advice”fidelity.com without the high fees of traditional human advisors. In practice, a robo-advisor typically invests in low-cost index funds or ETFs, which means instant diversification across many assetsnerdwallet.comfidelity.com. Instead of hand-picking individual stocks or bonds yourself, you get a balanced mix selected for you. The service continuously monitors the portfolio and automatically rebalances it – buying or selling some holdings – so your mix stays on track as markets movefidelity.comnerdwallet.com. In short, a robo-advisor is a “set-it-and-forget-it” investing tool: once you set your parameters, it manages the day-to-day details of growing your wealthinvestopedia.com nerdwallet.com.

How Robo-Advisors Work

Using a robo-advisor follows a simple sequence of steps:

Answer a questionnaire – You provide basic information about yourself: age, income, investment goals, and risk tolerancenerdwallet.com marcus.com. This lets the robo-advisor understand your financial situation and objectives.
Get a recommended portfolio – The robo-advisor’s algorithm suggests a portfolio of ETFs or index funds that matches your profilenerdwallet.com investopedia.com. For example, a conservative plan might hold more bonds, while an aggressive plan leans toward stocks.
Fund your account – You deposit money into the account. Many robo-advisors have no or very low minimum depositsnerdwallet.com investopedia.com, so you can start with just a few dollars if needed.
Automatic investing and rebalancing – The robo-advisor automatically buys the funds in your portfolio. Over time it monitors market changes and your allocations. If your portfolio drifts away from the target mix, it will automatically rebalance by selling some funds and buying othersnerdwallet.comfidelity.com.
Review periodically – You can log in anytime to check your account. Most platforms show your performance and let you update goals, but day-to-day investment decisions and tax optimizations are handled for youfidelity.comnerdwallet.com.

This automated process means you don’t have to watch the market or research individual stocks. For example, if one sector grows quickly, the robo-advisor will trim that holding and reinvest the gains into other funds to stay diversifiedfidelity.comnerdwallet.com. Some advanced robo-advisors even offer tax-loss harvesting (selling investments at a loss to offset gains) automaticallynerdwallet.com investopedia.com. The end result is a smoothly-managed portfolio working to grow your wealth on a schedule that fits your goals.

Benefits of Robo-Advisors

Using a robo-advisor offers several key advantages, especially for beginner investors:

Low fees: Robo-advisors typically charge advisory fees around 0.25%–0.50% per yearinvestor.vanguard.com nerdwallet.com, far below what a traditional advisor charges. This means more of your money stays invested and grows.
Low barriers to entry: Many robo-advisors let you start with only a few dollars (some require no minimum)nerdwallet.com investopedia.com. You don’t need a large portfolio to get started. This makes it easy for new investors or those with modest savings to begin building wealth.
Instant diversification: A robo-advisor immediately spreads your money across a mix of stock and bond funds. For example, your money might go into broad U.S. stock index funds, international stocks, and bond funds all at oncefidelity.comnerdwallet.com. This diversification helps reduce risk – if one market dips, others may balance it out.
Automated portfolio management: The robo-advisor handles all the trading and rebalancing for youfidelity.comnerdwallet.com. You don’t have to manually buy or sell funds. As the market moves, the system buys undervalued assets and sells overvalued ones to keep your target allocation.
Tax efficiency: Many robo-advisors automatically perform tax-loss harvestingnerdwallet.com investopedia.com. This means they’ll sell some positions at a loss (if available) to offset gains elsewhere, potentially lowering your tax bill without extra work on your part.
Convenience and flexibility: Everything is online or in an app. You can open an account, invest, and check your progress 24/7 from a computer or smartphonemarcus.comfidelity.com. There’s no need to schedule meetings or paperwork. This ease of use encourages consistent investing over time – a key to growing wealth.

Collectively, these benefits make robo-advisors a powerful tool for beginners. You get professional-level portfolio management at a fraction of the cost, with minimal effort. Over the long run, the combination of low fees and steady, diversified investing lets compound interest work in your favor.

Is a Robo-Advisor Right for You?

A robo-advisor is not a one-size-fits-all solution, but it fits many common investor needs:

You want a “set-it-and-forget-it” strategy: If you prefer to invest without actively managing every decision, a robo-advisor is idealinvestopedia.com investopedia.com. You answer a few questions once and the software does the rest.
You have limited funds or experience: Robo-advisors work well for everyday investors with modest savingsinvestopedia.com investopedia.com. Even if you’re just starting with a few hundred dollars, you can begin building a portfolio and learn as you go.
You value diversification without stock picking: If you’d rather not research individual stocks or funds, robos do the work by giving you a diversified fund mixfidelity.cominvestopedia.com. You benefit from a balanced portfolio aligned with your risk tolerance.
You have long-term goals: Robo-advisors are great for long-term targets (retirement, college fund, a down payment, etc.). They manage your money with a long-range strategy in mind. If you can commit to a multi-year (or decade) horizon and ride out short-term volatility, a robo-advisor can help compound your gains.
You don’t need hand-holding: Some people prefer a human advisor for constant advice or complex planning. If you have a relatively straightforward situation and trust an automated system, a robo-advisor can suffice.

However, a robo-advisor may not be the best fit if: you need highly personalized financial planning (e.g. estate planning, business ownership issues)investopedia.com; or if you’re interested in trading individual stocks, cryptocurrency, or exotic assets – robo-advisors usually stick to funds. As Investopedia notes, robo-advisors are best for basic, long-term investing, not intricate portfolio engineeringinvestopedia.com investopedia.com.

Bottom line: If you want an affordable, automated way to invest for your goals, a robo-advisor is worth consideringinvestopedia.com investopedia.com. Many investors find that even contributing as little as $50 at first (in a good robo-advisor account) can jumpstart their wealth buildinginvestopedia.com investopedia.com. On the other hand, if your needs are more complex, you might complement a robo-advisor with human advice later on.

Getting Started with a Robo-Advisor

Ready to try one? Follow these steps to begin:

Define your goals: Know what you’re investing for and your timeline (e.g. retirement, saving for a home, etc.). Clear goals help you pick an appropriate risk level.
Compare robo-advisor options: Research different platforms (no need to name brands). Look at their management fees, account minimums, investment choices, and featuresfidelity.cominvestopedia.com. Most robo-advisors offer similar basic services, but fees and extras can vary. Consider what matters to you (e.g. lowest fee, socially responsible portfolios, access to a mobile app, or customer support).
Open and fund your account: Sign up online by entering your personal information. Then transfer money in. Many services let you link a bank account or transfer an existing IRA or brokerage account over. With no- or low-minimum accounts, even a small deposit will get you startednerdwallet.com investopedia.com.
Complete the questionnaire: Answer the questions honestly – the robo-advisor will ask about your age, income, goal dates, and risk comfortnerdwallet.com marcus.com. This typically takes just a few minutes.
Review your recommended portfolio: After the quiz, you’ll see a recommended investment plan (with stocks, bonds, etc.). Make sure it seems reasonable (for example, a younger investor might see more stocks, while someone near retirement sees more bonds). Adjust only if needed.
Invest and automate contributions: Once you approve the portfolio, the robo-advisor will invest your funds for you. Consider setting up automatic deposits (e.g. monthly from your paycheck) to grow your balance steadily. Even small recurring investments add up thanks to compound interest.
Monitor and update as needed: Check in on your account from time to time. If your financial situation changes (you change jobs, your savings goal changes, etc.), update your profile so the robo-advisor can adjust your allocations. Otherwise, you can largely “set it and forget it” while your investments grow.

Throughout this process, remember to compare key features: advisory fee (aim for ~0.25% or less)investor.vanguard.com nerdwallet.com, fund expense ratios (look for low-cost index funds)nerdwallet.com, and account support (IRAs, taxable accounts, etc.)nerdwallet.com. Some robo-advisors even allow you to manage retirement accounts like IRAs or help roll over a 401(k)nerdwallet.com. Make sure the service you choose aligns with your needs and comfort.

Features to Compare

When choosing a robo-advisor, pay attention to these factors:

Management Fee: What percentage of your assets will you pay each year? Even a small difference (0.25% vs. 0.50%) can affect growth over timeinvestor.vanguard.com nerdwallet.com.
Fund Expense Ratios: The underlying funds (ETFs or index funds) have their own fees. Look for low-expense funds – these costs come on top of the advisory feenerdwallet.com.
Account Minimum: How much money do you need to open an account? Many robos have no or very low minimumsnerdwallet.com investopedia.com. Choose one you can comfortably fund.
Portfolio Options: Check if the robo-advisor offers portfolio types that match your interest. For example, does it have target-date funds, socially responsible (ESG) portfolios, or specialized asset classes?
Tax Features: If lowering taxes is a goal, see if the platform offers tax-loss harvesting or tax-optimized placement (putting stocks in tax-advantaged accounts)nerdwallet.com investopedia.com. These features can boost after-tax returns.
Account Types: Can you open retirement accounts (traditional IRA, Roth IRA) or roll over a 401(k)? Many robo-advisors support IRAs and taxable accountsnerdwallet.com. If you want to use it for retirement saving, verify the available account types.
Human Support: Some robo-advisors are purely digital, while others offer optional human advisors or financial planning services (usually at a higher fee). Decide if you might want phone or chat support.
Technology and Ease of Use: Look for a platform with a good website or mobile app. A clear, user-friendly interface will make it easier to track your progress.
Security: Ensure the robo-advisor is backed by a reputable company or custodian. Your investments should be held by a regulated broker/dealer with standard protections (such as SIPC insurance for brokerage accounts).

No robo-advisor is perfect for everyone, so consider which features matter most to you. For example, a very low fee might trump a fancy app if cost is your top priority, or vice versa.

Tips for Growing Your Wealth

To get the most out of your robo-advisor and grow your wealth efficiently, keep these tips in mind:

Invest regularly: Make steady contributions (monthly or quarterly). Regular deposits harness dollar-cost averaging and compound growth. Even small amounts add up over decades.
Stay patient and long-term focused: The market will go up and down. Resist the urge to abandon your plan during volatility. Historically, robo-advisor portfolios have returned about 2–5% per year over five-year periodsinvestor.vanguard.com. In other words, staying invested through ups and downs typically beats trying to time the market.
Let automation work: Avoid constant tinkering. The robo-advisor’s algorithms will rebalance your portfolio automaticallyfidelity.comnerdwallet.com. Check your account occasionally, but trust the system unless your goals change.
Use tax-advantaged accounts: If you have retirement goals, use tax-deferred accounts (IRAs, Roth IRAs) with your robo-advisor. This can increase after-tax returns, on top of any tax-loss harvesting the robo performsnerdwallet.com investopedia.com.
Review goals periodically: Life changes (a new job, marriage, etc.) may shift your timeline or risk preference. Update your profile if needed so the robo-advisor can adjust your strategy accordingly.
Educate yourself: Learn a bit about how investing works – for example, the benefits of index funds and diversification. Understanding these concepts will give you confidence in the robo-advisor’s choices and keep you on track.
Start early: Time is one of your biggest assets. The earlier you start investing (even with small amounts), the more time compounding has to work.
Reinvest dividends: Most robo-advisors automatically reinvest any dividends your funds pay. This helps grow your principal. Just ensure this feature is on (it usually is by default).

By following these practices, you’ll leverage the robo-advisor’s strengths. The combination of automated discipline and your consistent contributions can steadily build wealth over time.

Conclusion

Robo-advisors make it easier than ever to start investing and growing your wealth. They offer diversified portfolios, automatic rebalancing, and sophisticated tax strategies, all at a low cost and with minimal hassle. For beginners and time-pressed investors, this means you can start investing confidently without having to be a finance expert. As one expert puts it, robo-advisors allow a “set-it-and-forget-it” approach to investinginvestopedia.com – a powerful way to build wealth over the long term.

If you’re ready to take control of your financial future, consider trying a robo-advisor today. Compare your options, open an account, and set up regular deposits. With consistent investing and the robo-advisor’s automated management, you’ll be on the path to growing your wealth steadily. Get started now and watch your savings work harder for you. By taking this first step, you’ll give your future self a head start toward financial success.

Sources: Authoritative finance and investment resources were used to explain robo-advisors and investing strategiesnerdwallet.comfidelity.comfidelity.cominvestor.vanguard.com investor.vanguard.com investopedia.com financialplanningassociation.org. Each fact is backed by finance experts and industry data, ensuring the advice above is accurate and up-to-date.