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One of these 5 investor types? Why robo-advisors might not be for you
Kat AokiOctober 18, 2025 at 3:00 AM
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One of these 5 investor types? Why robo-advisors might not be for you (Westend61 via Getty Images)
Robo-advisors have taken the investment world by storm, and honestly, we get why. These fully automated financial advisors now manage over $1 trillion in assets, according to The Motley Fool. They promise low fees, easy setup and hands-off portfolio management that lets you set it and forget it.
But just because something's popular doesn't mean it's right for everyone. While robo-advisors work great for many investors, they can be a bad fit for others. Let's explore which investor types might find these platforms unfitting for their needs.
1. Hands-on investors who love picking individual stocks
Are you the type who gets excited reading quarterly earnings reports? Do you have strong opinions about which tech stocks sit undervalued? Most robo-advisors probably aren't the best option for you. These platforms generally focus on broad market exposure, not individual stock picking.
That said, several platforms now bridge the gap between full automation and hands-on control:
Wealthfront's direct indexing. Instead of investing in funds that contain the 500 largest U.S. companies (known as S&P 500 funds), this feature automatically buys the actual individual stocks of those same companies while allowing you full control over them.
M1 Finance's pie system. This system lets you build your own custom portfolio by selecting individual stocks and ETFs and setting target percentages, then the platform automates all future investing and rebalancing according to your specifications.
Robinhood Strategies. This account offers actively managed portfolios that mix ETFs and individual stocks, but lets you exclude up to three specific companies you don't want to own.
But if you genuinely love researching companies and making individual stock picks regularly, you'll probably want a traditional brokerage account where you can trade whenever inspiration strikes.
Learn more: How I started investing with just $100 — and why you shouldn't wait
2. High-net-worth investors with complex financial situations
Got multiple properties, a business, a complex tax situation or assets spread across various accounts? Robo-advisors can't help with that. These platforms only see the one account you give them access to. A human advisor can consider your complete financial picture.
Tax optimization, retirement planning and coordinating investments with business cash flow all require someone who sees the big picture. One person who understands how all your financial pieces fit together.
Learn more: How to find a trusted financial advisor: Costs, benefits and what to consider
3. Short-term savers who need their money soon
Planning to buy a house in two years? Saving for a wedding next year? Robo-advisors target long-term investing, not short-term savings goals. Robo-advisors typically build portfolios using exchange-traded funds (ETFs) and mutual funds, which work as large baskets of hundreds or even thousands of stocks and bonds.
While this diversification shines for long-term wealth building, it means your money faces market volatility. If you need access to your funds within the next few years, the market could tank right when you need it. For short-term goals, you're better off with high-yield savings accounts (HYSAs) or certificates of deposit (CDs).
Learn more: Saving vs. investing: Which strategy works best for growing and protecting your wealth?
4. DIY investors who want to learn the ropes
There's something to be said for learning by doing. If you're genuinely interested in understanding how investing works, robo-advisors might actually hold you back. They remove you from the decision-making process. That means you won't learn about asset allocation, rebalancing or market dynamics.
Many investing platforms offer practice accounts with fake money that let you learn how investing works without any financial risk. This paper trading feature gives you hands-on experience making buy and sell decisions, watching how markets move, and understanding what affects stock prices.
Once you're comfortable, self-directed investing gives you full control. This option suits those who enjoy investment research and want to understand market dynamics better.
Learn more: 11 common investment fees that eat away at your returns (and how to avoid them)
5. People who need hand-holding through market volatility
When the market tanks 20% and your portfolio bleeds red, a robo-advisor's algorithm offers cold comfort. If you need emotional support and guidance during volatile times, the digital efficiency of automation might leave you feeling abandoned when you need reassurance most.
A human financial advisor provides that personal touch. Someone who can walk you through market downturns, explain what's happening and help you avoid panic decisions.
Learn more: 5 moves you shouldn't make during a recession: Expert tips for weathering an economic storm
How to choose a socially responsible robo-advisor
Want to avoid companies that profit from alcohol, tobacco or weapons? Or want one that screens out companies actively destroying our planet? The good news is that socially responsible robo-advisors have come a long way. Mainstream platforms like Betterment and Wealthfront offer basic environmental, social and governance (ESG) portfolios that screen out "sin" industries. For more control, you could go with a specialized platform like EarthFolio.
The trade-off is that these specialized platforms often require higher minimums — for instance, EarthFolio requires $25,000 to open an account. And if your values-based requirements are extremely specific, you may still need a human advisor to create a truly customized portfolio.
The bottom line: Know thyself
Robo-advisors are great tools for many people. One key benefit of using a robo-advisor for retirement savings is that the fees are much lower than a traditional advisor — typically around 0.25% annual management fee — and they make investing accessible to people who might otherwise never get started.
But they're not magic solutions that work for everyone. If you fall into any of the categories above, don't feel pressured to automate just because it's trendy. The best investment strategy is the one you can stick with long-term, especially when you understand concepts like dollar-cost averaging that can help smooth out market volatility.
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Common investing myths — debunked
What is a bear market? And how to spot a market downturn
Best ways to invest and grow $50,000
7 pieces of investing advice that experts say are completely useless
What is a CD ladder? And how to build one
📩 Have thoughts or comments about this story — or ideas on topics you'd like us to cover? Reach out to our team at [email protected].
Source: "AOL Money"
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