How do robo-advisors actually decide where to invest my money?

A robo-advisor asks you questions about your goals, time horizon, and risk tolerance, then uses an algorithm to build a diversified portfolio of low-cost index ETFs matched to your answers. It automatically handles rebalancing, dividend reinvestment, and in taxable accounts often tax-loss harvesting, all without you picking individual funds. The underlying strategy is usually straightforward modern portfolio theory: a mix of stock and bond ETFs weighted by your risk profile. You're paying a small management fee, typically around 0.25 percent a year, on top of the ETFs' own expense ratios, for the convenience and automation. It's a reasonable hands-off option, though you could replicate a similar portfolio yourself with a target-date fund or a three-fund portfolio and skip the extra layer of fees.