Pure Benchmarks · Guide

Is My Robo-Advisor Doing a Good Job? How to Check

Short answer

A robo-advisor makes decisions on your behalf: the allocation, the funds, when to rebalance and, often, when to harvest tax losses. Judge it the way you would judge any advisor. Compare the return with a simple benchmark at the same stock and bond mix, net of the fee. Check whether its automatic changes, rebalancing and harvesting, have added more than they cost. And see how the account ranks against real investors holding a similar mix. The robo’s own dashboard usually reports its return without any of those comparisons.

Robo-advisors are marketed as a simple, low-cost way to invest, and for many people they are. But they are not passive: behind the dashboard, an algorithm chooses an allocation, selects funds, rebalances and often sells positions to realise tax losses. Those are decisions, and they can help or hurt. This page explains how to evaluate a robo-advisor using benchmarks and comparisons its own reports rarely show.

Use a benchmark at the same mix

A robo portfolio that is 70 percent stocks and 30 percent bonds should be compared with a simple blend of broad index funds at 70/30, not with the S&P 500. If a two-fund portfolio at the same mix would have done as well or better after costs, the robo’s value has to come from convenience or behaviour rather than returns.

Count the full cost

The advisory fee is the visible part. The funds inside the portfolio also charge expense ratios, and some platforms hold a portion in cash that earns less than it could. Adding the layers together gives the real cost, which is what the benchmark comparison should be net of.

Check what the automatic decisions added

Rebalancing, tax-loss harvesting and allocation changes are all decisions the algorithm makes. Harvesting can have real value in taxable accounts, but the benefit depends on your tax situation and is often presented in its best light. The fair test for any automatic change is the same as for a human one: did the portfolio end up better than it would have been had that change not been made?

Behaviour may be the biggest benefit

For some investors the main value of a robo-advisor is that it stops them making emotional decisions: it keeps contributing, keeps rebalancing and makes panic selling slightly less convenient. That is a genuine benefit, and it is worth being honest about whether you would have stayed invested without it. DALBAR’s data showing the average equity fund investor trailing the S&P 500 by 848 basis points in 2024 is largely a measure of that behaviour.

Compare against real investors

An index shows whether the robo kept up with the market. It does not show whether the account did well compared with other people holding a similar mix. Pure Benchmarks, our own product, places connected accounts in one of nine standardized risk categories, ranks them against verified investors in the same category, and scores changes against the do-nothing baseline.

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Frequently asked questions

How do I know if my robo-advisor is performing well?

Compare its return, net of all fees, with a simple index blend at the same stock and bond mix, check whether its rebalancing and harvesting added more than they cost, and see how the account ranks against real investors with a similar mix.

What benchmark should I compare my robo-advisor to?

A simple blend of broad index funds at the same stock and bond allocation. The S&P 500 is only a fair comparison for an all-stock portfolio.

Is tax-loss harvesting worth it?

It can add value in taxable accounts, depending on your tax situation and future plans. It has no effect in tax-advantaged accounts such as IRAs and 401(k)s. The benefit is often presented optimistically, so it is worth checking against your own circumstances.

Is a robo-advisor better than doing it myself?

It depends on whether you would follow a plan consistently on your own. If a robo stops you from panic selling or pausing contributions, that behavioural benefit may outweigh the fee. If you would stay disciplined anyway, a simple index portfolio may do the same for less.

How does my robo-advisor account compare to other investors?

Pure Benchmarks, our own product, ranks connected accounts against verified investors in the same risk category, so you can see whether the result was ordinary or unusual for your mix.

Keep exploring

See how real portfolios at a specific firm rank against everyone else:

New here? Read the portfolio benchmarking FAQ or the Pure Benchmarks blog.

This page is an information baseline for comparison only. It is not investment advice and not a recommendation to buy, sell, replace, or transfer any specific asset, account, or firm. Past performance does not guarantee future results. All figures shown are illustrative.