How to choose an automated investment portfolio: A beginner's guide

Investing can be a powerful way to take control of your wealth-building potential. But if you’re new to investing or unfamiliar with all the choices outside of an employer-sponsored investment account, such as a 401(k), it can feel daunting to find and pick a portfolio that aligns with your skills and needs. 

The good news is that you don’t need to be a stock market master or top-tier trader to benefit from investing — an automated investment portfolio might suit you better. For instance, at Ally Invest, all you need is a goal in mind and a minimum of $100 to begin funding your account. A robo-advisor will help you handle the rest. 

Automated investment portfolios can be a beneficial tool for investors with all types of goals, timelines, skill levels and time availability. They take just minutes to set up and require little oversight, making them a more time-efficient, hands-off alternative compared to self-directed investment accounts. 

Robo portfolios are also a more accessible choice if you want help managing your investments but don’t need or aren’t interested in paying for the services of a human financial advisor. Typically, financial advisors charge around 1% of assets managed. Ally Invest offers a completely free cash-enhanced Robo Portfolio, as well as a market-focused Robo Portfolio with an annual advisory fee of just 0.3% charged monthly. 

Automated portfolios also tend to have lower investment minimums than what is required to work with a financial advisor. For example, Ally Invest Personal Advice customers can begin working with a dedicated advisor at $100,000 in managed assets, but you can open an Ally Invest Robo Portfolio with a $100 minimum investment. 

Just like your financial goals, automated investment portfolios aren’t static. Ally Invest Robo Portfolios are managed and monitored daily and automatically adjusted when needed. If your goals change, you can update them at any time. Your robo-advisor will help rebalance your asset allocation, so you stay on track without all the research, analysis and decisions that go into finding the right investments. 

Before you make a financial decision like opening an investment account, it’s a good idea to take a moment and consider the following:

Whether you’re investing to build general wealth or have specific goals in mind (such as retirement or your child’s education), define why you’re investing. This can help you form a timeline and target goal date as well as better understand how much risk you're willing to take on in pursuit of your goal.

All investments incur some level of risk , and some people have a greater appetite for it than others. By understanding your own risk tolerance (which is often correlated with your investment horizon), you can narrow your search to portfolio choices that can be tailored to your comfort level. 

As you explore portfolio choices from various providers, be sure to pay attention to details like monthly or annual fees, minimum investment requirements and portfolio features. Some automated portfolios may charge a percentage of your assets as a monthly fee, charge for rebalancing or take a percentage of earnings or dividends. Read the fine print and don’t let unnecessary or surprise fees slow down your financial progress. 

Asset allocation and diversification are investment terms that refer to the make-up of your portfolio. Asset allocation is how different asset classes are balanced in your portfolio. For example, you might have 60% stocks and 40% bonds . The greater your risk tolerance, though, the more of your portfolio you might allocate to securites with higher risk and higher potential reward.

Diversification is all about having a variety of different holdings in your portfolio so that they’re less likely to be impacted by the same market factors, which can lower your potential for risk. 

While an automated investment portfolio will recommend a diversified set of holdings and automatically rebalance to keep your asset allocation in check, it’s smart to understand these terms as you explore portfolios. 

Whether you prefer to steer your own investments or offload your day-to-day portfolio management to a robo-advisor, you deserve a portfolio that reflects your goals and values. That’s why Ally Invest offers four Robo Portfolios to choose from. Each of the following portfolio choices is available as a cash-enhanced portfolio (zero fees, approximately 30% of your portfolio is set aside as cash) or a market-focused portfolio (0.30% annual advisory fee, about 2% of your portfolio is held as cash). 

The Core portfolio is a great choice for hands-off investors looking for a highly diversified mix of domestic, international and fixed-income assets. This portfolio can be adjusted to accommodate a range of risk tolerances, from aggressive to conservative. 

As its name suggests, the Income portfolio is designed for investors focused on dividend yield and income with a lesser risk profile. 

The Tax Optimized portfolio is built to help maximize investments and lower tax liability. If you contribute after-tax dollars to your investment account, consider this choice for a mix of tax-advantaged, low-cost exchange-traded funds (ETFs). 

Where you invest your money can make a difference, and our Socially Responsible portfolio lets you direct a greater portion of your investments to socially impactful companies. This portfolio choice is similar to the Core, but with a heavier concentration on businesses that reach certain environmental, social and governance (ESG) benchmarks. 

Automated investing is a hands-off way to participate in the market. With a robo-advisor, you can feel confident that your portfolio will stay aligned with your goals, even if you don’t touch it for a while. And with Ally Invest’s four Robo Portfolio choices, you get the power of automated investing and rebalancing combined with 24/7 human support — plus the opportunity to invest based on what matters most to you.