Intimidated by Investing? Consider This Type of Brokerage Account

I finally did it -- at the age of 40, I finally have my first-ever retirement account. I opened it a few months ago, and along with also becoming a homeowner (again) earlier this year, I've been feeling more and more like a "real" adult.

Rather than diving into picking stocks and researching companies, I opted to open a traditional individual retirement account (IRA) with a robo-advisor. Should you do the same? Let's find out.

Investing is pretty new to my radar

I don't come from a particularly financially savvy family, and investing isn't something I really heard about growing up. When I finished graduate school and started my first paying job, I was offered the chance to sign up for the 401(k) plan -- a rare offering among nonprofit museums

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Long story short, I didn't sign up because I wasn't really sure what the point was. Plus, I was at the beginning of 11 years of making large payments on my student loans, and I didn't have the money to spare from my not-generous paychecks. And this trend continued, as ironically, I went on to take even lower-paying (if more emotionally satisfying) jobs.

I had other goals to accomplish before I could dive into investing

It wasn't until I came to Motley Fool Money in 2022 that I was in a position to learn more about investing and why it was a good idea. I also undertook an overhaul of my finances that year, with an initial primary focus on paying off high-interest debt and saving to become a homeowner for the second time in my life (and knowing it was a much better idea this time around).

With those goals accomplished in 2022 and 2024, respectively, it was finally time to start investing for retirement. In a perfect world, I would have started much sooner -- but even at age 40, it's truly better late than never.

Why a robo-advisor?

As you may have guessed, I'm not entirely comfortable in the investing space quite yet (although I've come a long way!). That's why I decided to use a robo-advisor for my retirement account rather than picking my own investments.

When I opened my account, I filled in a short questionnaire about my goals and risk tolerance, transferred $1,000 to start things up (conveniently, I opened my IRA with a bank I already had accounts with), and hit "go," in a metaphorical sense. I have since set up automatic weekly transfers from my checking account, and I absolutely love that I don't have to do anything more to manage my IRA.

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The money moves over, and the robo-advisor invests it automatically in a mix of ETFs and bonds (and 2% of my money remains in cash, earning the same high APY as my high-yield savings account). I can check on my progress anytime I want, but I try not to do that too often -- a market downturn can be scary, and as a long-term investor, I don't want to be tempted to sell at a loss and pull out what's left of my money.

Is a robo-advisor right for you?

I might be the perfect candidate for a robo-advisor, as a middle-aged beginner investor who has many other skills but hasn't yet built up investing muscles. If this describes you, I recommend looking into a brokerage account that offers a robo-advisor service.

If you're disinterested in picking individual stocks and want a hands-off investing experience, a robo-advisor is a good choice. And you can even open a taxable brokerage account with a robo-advisor if you're investing with goals other than retirement (or want more flexibility). You'll answer questions about your goals and risk tolerance to be matched with the right set of investments.

Finally, using a robo-advisor is a good way to save money on investing as compared to using a human financial advisor. You might pay a management fee of 1% to a financial advisor helping you choose investments and set goals for your money -- but some of our favorite robo-advisors charge just 0.25% for management fees.

I'm very happy with my robo-advisor-managed IRA thus far. While I wish I'd started this years ago, I can feel good about finally getting to benefit from the S&P 500's average annual returns of over 10% -- if I keep putting money into my IRA for the next couple of decades.