People working on their computers next to a cartoon robot

You’ve probably come across the term “robo-advisor” in the media at some point. It has become a popular way to refer to the more automated approaches to managed investing that have emerged in the past several years.

The name implies that robots or computers are calling all the shots regarding your investment strategy and financial assets. While some financial companies might offer automated investing that involves little-to-no human monitoring, more comprehensive robo-advisors, like Ally Invest’s, include both a team of investment professionals and computer algorithms to recommend the right investment portfolio(s) for you based on a specific set of criteria and then regularly analyze and rebalance your portfolio.

In other words, they’re a healthy blend of old-school smarts with 21st century efficiency and convenience. But why is this hybrid approach of a robo-advisor smart, regardless of market conditions?

Robo-advisors perform a balancing act.

Before you make any investment — whether you’re buying stocks, bonds, mutual funds or other investment products — you need to do some research. (That’s especially true if you’re a self-directed investor and it’s completely up to you which stocks, bonds, and other investments make up your portfolio.) After all, today’s “must buy” may be significantly riskier than what you’re comfortable with.

But if you find yourself in a time crunch, or aren’t interested in investment research, you could run the risk of making uninformed choices. This could potentially lead to an ill-informed investment strategy and/or an unbalanced portfolio made up of investments in one sector, leaving you exposed should that sector take a downward turn.

A robo-advisor can prevent you from putting all your eggs in one basket, so to speak. It can help you build a professionally designed, diversified portfolio of exchange-traded funds (ETFs) that match your risk tolerance and monetary goals.

Robo-advisors can make adjustments for market fluctuations.

In a bull market, even though the overall trajectory is upwards, some assets will perform better than others. Over time, the holdings within your investment portfolio could get out of balance, no longer aligning with your risk tolerance or goals. The same goes with the downward movement of a bear market.

Robo-advisors continually monitor your account and automatically re-balance your investments so they remain aligned to your target allocation, maximizing returns during the stock market’s ups and downs.

Headlines don’t sway Robo-advisors.

When there’s skyrocketing growth, news reports often tout the market’s latest high with stories about the hottest stocks. These headlines can be a siren’s song, luring you to invest your hard-earned cash at a moment’s notice with little-to-no research. If you’re a self-directed trader, you might not be able to resist the call to buy.

Since 2013, the Dow Jones Industrial Average has skyrocketed an astonishing 14,000 points to more than 28,000 points in 2019. Dow Jones Index

Same goes for the low time of the bear. Even the most seasoned investor can experience increased anxiety from downward market movement and make a knee-jerk financial decision, leading to poor investment outcomes.

Robo-advisors don’t get emotional. And because they provide a partially automated process for investing based on your goals, they can help you avoid emotional investing decisions fueled by headlines, market highs (or lows), friend recommendations and gut feelings.

But remember, no matter what type of investing you do, there’s always risk. So be sure to have clear expectations in mind and know your risk tolerance before you make any decision.

Avoid the “Set-It-and-Forget-It” mentality.

Whether it’s a bull or bear market, many self-directed investors can slip into a “set-it-and-forget-it” mentality. They start out strong, smartly building a portfolio that consists of a variety of investments. But then they get busy or find they can’t keep up with the market shifts, potentially causing them to miss out on valuable gains or rack up costly losses.

If this sounds like you, an investment account that’s designed to adjust to meet your pre-set financial goals — hint, hint: a robo-advisor — might be a better match for you than a DIY, self-directed approach. They will automatically reallocate your portfolio’s holdings to stay in line with those goals.

A Cost-Efficient Approach

Finally, one of the more obvious reasons why a robo-advisor is a smart move in any market is that it can ultimately help you save on fees. That’s because automation reduces costs by having computer algorithms take care of the more time-consuming manual tasks involved in traditional financial advising.

With our cash-enhanced Robo Portfolios, there are no annual advisory fees, so you get the benefits of intelligent automation, plus a team of professionals who put their smarts against creating and monitoring your portfolios. And, of course, you play a key role by setting some guidelines.

You can start investing with a Robo Portfolio for as little as $100. The only other thing you’ll need? Your investment goals in mind.

The graphic is a screengrab of the Ally Invest platform, which asks customers to tell us about themselves and their investment goals. Questions relate to age, type of account, term planned for investing, risk tolerance, assets and the amount designated to open the account.


Once you provide your goals, our group of experts — with the assistance of automation — does all the heavy lifting, including determining which portfolio best complements your situation and re-balancing to keep your investment portfolio on track.

When you don’t have the time to conduct your own investing supported by the necessary research and attention, then a more automated approach, such as a robo-advisor, may be the smart option to help build wealth in any investing climate.

Learn more about Ally Invest today.