A robo-advisor is an online investment service that uses computer algorithms to automatically build and manage your investment portfolio with little to no human involvement. You answer questions about your goals and risk tolerance, and the robo-advisor creates a diversified portfolio of low-cost investments and automatically rebalances it for you. Fees are typically lower than working with a human financial advisor.
You visit a robo-advisor website, answer questions about when you plan to retire and how much risk you can handle, and invest $5,000. The robo-advisor automatically creates a portfolio of different index funds suited to your answers. Every few months, it checks your portfolio and automatically rebalances without you having to do anything.
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