Robo advisors use computer algorithms to manage your investments. These programs are designed for beginners and experienced investors alike. They use simple investment strategies, such as allocating 60% of the assets to stocks and 40% to bonds. They also offer access to a professional financial adviser who can help you with your portfolio management. Robo advisors are popular with many investors who don’t want to spend their time doing research on individual stocks.

Most robo advisors follow modern portfolio theory and construct passive, indexed portfolios. They then monitor the portfolios and periodically rebalance them to maintain optimal asset class weightings. They do this by using rebalancing bands and target weights for each asset class. For example, a client’s portfolio might contain 30% of emerging market stocks, 30% of domestic blue chips, and 40% of government bonds.

Robo advisors may be a great solution for certain situations, but there are risks associated with using them. Firms need to be sure they’re programming their robos with realistic investment goals and capturing their risk profile. They also need to establish a strong risk management framework that includes a purpose-built approach.

Robo advisors invest in exchange-traded funds that track an underlying index. The software chooses only the best investments for each client. Many of them also offer tax-loss harvesting, which is a great way to reduce your tax bill. These programs also offer low fees for the services they provide.

Robo advisors also offer account support. They may offer live chat or phone support. However, the level of support varies from company to company. In general, robo advisors should provide full disclosures on their website. The disclosures should clarify any potential conflicts of interest and other factors that consumers should consider.

Some robo advisors charge a management fee. This fee is paid to the fund management firm and is usually less than 0.05 percent of the investment amount. This means that you will pay between $5 and $35 per $10,000 invested. This fee is generally lower for a robo advisor than a traditional brokerage.

Some robo advisors offer access to a certified financial planner. However, this will depend on the type of account you have. If you choose to use a robo advisor, it is best to choose one that carries the SEC risk assessment. The SEC can monitor the company and limit its risk.

Robo advisors also allow you to transfer your existing investments. This may be a good option for beginning investors and those who don’t have financial expertise. These advisors usually charge a fixed monthly fee, while others may charge a percentage of assets. Some robo advisors charge as little as 0.15% to 0.50% of assets.

Robo advisors are becoming more popular with investors. These automated investment systems automate day-to-day investing tasks and offer online account management.