Robo-advisor.
In plain English
A robo-advisor is an online platform that automatically builds, rebalances, and tax-optimizes an investment portfolio based on a few questions about age, goals, and risk tolerance. Underneath, almost all robo-advisors hold low-cost index ETFs. Typical fees are 0.25% to 0.40% of AUM per year, far below the 1% to 1.5% a human advisor usually charges. Examples include Betterment, Wealthfront, and the robo-advisors run by big brokerages like Schwab and Vanguard.
01Why it matters
Robo-advisors solve two problems at once for someone starting out: they pick a reasonable diversified portfolio and they keep it diversified through automatic rebalancing. The fee is high enough to matter over decades (0.25% on $500,000 is $1,250 a year) but low enough that the discipline they enforce often pays for itself.
02The math, step by step
Open a Betterment account with $10,000, answer six questions, and the platform allocates the money across about a dozen low-cost ETFs in a roughly 80% stock / 20% bond mix. Each month, new deposits buy whichever asset class is underweight. Once a year or so, the system rebalances back to target.
03What this is NOT
Robo-advisors handle investing only. They do not help with insurance, estate planning, tax strategy, or behavioral coaching during a market crash. For straightforward investing they often beat the average human advisor on cost; for complex situations a CFP may add more value than the higher fee costs.