You’ve Automated Much Of Your Small Business. Should You Put Your Investing On Autopilot, Too?

For many solopreneurs and small business owners, automating routine tasks using apps and tools is the best way to get more done at work in less time. Many like the automated approach to investing, as well, deducting a set amount from their pay every month to make sure they contribute to their retirement and other savings and investment accounts regularly.

However, managing these investments can be more time consuming than many anticipate. To streamline the process, some have turned to robo investing through robo advisor firms such as Betterment and Wealthfront. Such platforms provide access to automated, diversified portfolios, so investors don’t have to make as many investing decisions.

“Investing generally, and robo investing, specifically, is essential for entrepreneurs,” says Lawrence H. Gennari, partner at business law firm Gennari Aronson, LLP, in Needham, Mass., who advises high-growth startups. “Launching a new business is challenging, time consuming, and daunting, and the best entrepreneurs know that self-care matters. Investing in yourself is part of that critical self-care. By starting small and putting aside an amount—any amount—for investment, entrepreneurs will be positioning themselves—and their families—for long term personal success.”

Often, it costs less to use a robo advisor than a traditional one, but there’s a tradeoff: the range of strategies and investment options may be more limited.

Everyone is unique. If you’re thinking about automating your investing with a robo advisor, here are some key considerations.

How comfortable are you with a tech-based approach? A method of investing that works for friends and family may not be the best fit for you. “Many entrepreneurs don’t have access to experienced wealth advisors and reputable financial planners,” says Gennari. “Instead, some will reach out to well-meaning relatives who may refer them to resources or salespeople who aren’t a good fit. I’d recommend that entrepreneurs explore the robo platforms themselves and test and try which one might best fit.”

How much time do you have to devote to investing? “Running a business is really hard. Saving time is really important,” says Qian Liu, co-author with Elizabeth MacBride of The Little Book of Robo Investing. “With robo investing, you set it up and it’s on autopilot.” That may be an important consideration if you’ve tried in the past to use the DIY approach to manage your portfolio but are constantly falling behind. However, if you enjoy actively managing your portfolio, you may need to shop around for a robo advisor that gives you the flexibility you want.

What features are most important to you in an advisor? In addition to giants like Betterment and Wealthfront, there are more than a dozen other platforms, such as Acorns, Ellevest, JP Morgan Automated Investing and SoFi Wealth. Each has unique features, so it’s worth poking around to see which one is easiest for you to use—and keeping an eye out for new ones. “There are new robo advisors coming out every year,” says Liu. “They’re newer iterations of similar concepts with features that target different demographics. Some are more specialized and, for instance, target Gen Z women.”

If you’re planning to robo invest your retirement funds, a platform that supports a SEP-IRA may be ideal for you. These have contribution limits for 2024 of the lesser of $69,000 or 25% of compensation.

Build your emergency fund first. Eager as you may be to start or build up your investing, it’s important to keep some liquid cash on hand so you don’t go into debt to pay unexpected expenses. Liu suggests accumulating six months of living expenses for your savings. “After that, you should start investing,” she says. Keep in mind that just like entrepreneurship, investing is a long game.