Which Robo-Advisor is the Best? I invested $500 per month to find out
Have you ever wondered, how should you be using robo-advisors to invest?
Is there even a difference between all of the different apps and strategies?!
Since January 2021 I have been investing $500 across five different robo-advisor strategies and 3 different apps in order to track performance month over month.
I wanted to see if one method was better than the other or if the trending was still similar overall.
This is a little different than my previous method where I invested about $6000 in 2017 using robo-advisors. In my previous experiment, I invested $1000 each in SoFi, Betterment, Wealthfront, Ellevest, Fundrise and S&P500 all at once, and then let it sit there while I measure performance. You can see the latest January 2022 $6000 Investment Performance standings where Fundrise beat out the rest in the last year overall.
This time it will be doing smaller investment amounts on a recurring basis.
Why am I doing this?
Because you wouldn’t usually invest one time and then never again.
You would invest on a recurring basis by using the Dollar Cost Average investing strategy, you do smaller recurring investments instead of one big one, therefore you reduce your risk because you are spreading it out.
Instead of all of your eggs in one basket, they are spread out over many baskets. If the price drops, then the next monthly investment gets to take advantage of that lower price. If the price goes up, your previous investments reap those benefits.
I am also conducting this $500 recurring investment because it is fun to see what else is out there. Different robo-advisors offer different things. Is it just a marketing scheme or is does it actually perform better.
It is easy to find beauty or product reviews. But the performance reviews of investments is hard to find.
So here’s my experiment
I invested $500 per month in different strategies of investments, rather than picking different robo-advisors.
It is automated monthly investing without me having to think about it and it is already incorporated into my budget. The following are the different investment types I invested in:
- Traditional Robo-advisor- This is what I used before in my first experiment so I wanted to use this sort of a measuring guide. Similar to before, I answered the questionnaire to make investments agressive-ish. I used SoFI for this.
- Socially Responsible Robo-advisor- Betterment has a Socially Responsible Investing plan which has an “Increased weight in stocks of companies meeting certain social, environmental, and governance criteria.” We all want to be good right? But I wanted to see if good came at the price (less returns). I hope not, but I don’t have the data out there to tell me that so I am investing in SRI to figure that out.
- Big 5- I picked 5 stocks that were kinda the big guys out there: Amazon, Apple, Tesla, Google and Disney. Mainly I just wanted to see if they will out or underperform against the market. Since this doesn’t really matter which platform I use, I used SoFI again.
- Hedge Fund Allocation- So I wanted to first pick a few stocks with high dividends, but I didn’t want to pick low performing stock with high dividends. Then I found M1 Finance’s Hedge Fund Followers where it uses the recent 13F filings of hedge funds and matching the stock allocation, and found that the Icahn Capital Hedge Fund already had high dividends, so win win there.
- S&P 500- So as always, I used the S&P500 (SPDR) to compare against the market. I mean we have these roboadvisor companies putting in so much effort in creating and managing our portfolios. Does that even matter or should I just stick with S&P500 and call it a day? I dunno, it probably will depend on the day. Also since it doesn’t matter which platform I use for this either, I used M1 Finance.
How are they doing? Here is the update!
I invested in January 2021 and have been keeping track every month since then. See below for performance of the last several months. As you can see every month is different, and it the performance is very different than my first Robo-advisor tracker where performance was basically the same.
For ease of comparison, I am comparing the %s in the graph instead of the dollar amounts. Why? Because when I tried putting the dollar amounts in the graph, it was just an upward trending line and it was hard to see any differentiation.
And what’s doing the best?
See below for the rankings. Note that this changes every month, but that is what keeps things interesting.
So what the heck are you supposed to do with this info?
Whatever you want!
You can start investing in the S&P500, you can open your own “pie” using M1 Finance’s Icahn Capital Pie, you can open a regular robo-advisor or a socially responsible one.
You can subscribe and wait another couple of months to see how these all are doing to make sure you are comfortable with your decision.
You can even do all of the above.
But I hope you do something with it, because like I said, it is better to invest now than invest tomorrow. And if you are afraid of risk, that is ok. Doing a little bit every month will lower your risk and having it automated will force you to incorporate it into your budget (instead of spending it on random knickknacks.)
Thank you so much for checking out my post. I really really appreciate it!
Do you want to do this with me?
M1 Finance- Get $50 when you invest $100
Betterment- Get free management for up to $5000 for 1 year
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