Definition
An automated service that invests your money in index-fund portfolios and rebalances for a small fee on top of fund costs. A reasonable hands-off option; a DIY three-fund portfolio does the same for less.
Why it matters
Robo-advisors solved the getting-started problem: sensible allocation, automatic rebalancing, no minimums. The honest question is whether the convenience stays worth ~0.25% a year as the balance grows.
Example
A new investor lets a robo-advisor run a diversified portfolio for 0.25% plus fund fees. Years later, with a $400,000 balance, that convenience costs $1,000 a year, and they weigh managing a three-fund portfolio themselves.
Related terms
This definition is educational, not financial, legal, or tax advice. U.S. rules and limits change; verify time-sensitive details with official sources. See our disclaimer.