Investment automation means using technology to handle investing tasks that people used to do manually. Computers, software, and algorithms now make the decisions, execute the trades, and manage the portfolio with little or no human involvement day-to-day.
Why Investment Automation Exists
People created automation for three main reasons:
- Remove emotions. Humans often buy when the market is high (greed) and sell when it is low (fear). Machines follow rules without panic or excitement.
- Save time. Checking markets, rebalancing portfolios, and placing trades can take hours every week. Automation does it in seconds.
- Reduce costs. Many automated services charge much lower fees than human financial advisors.
Main Types of Investment Automation
Robo-Advisors
These are the most popular form for regular people. You answer a short questionnaire about your age, income, goals, and risk tolerance. The software then builds and manages a diversified portfolio for you, usually made of low-cost ETFs.
Popular robo-advisors:
- Betterment
- Wealthfront
- Vanguard Digital Advisor
- Schwab Intelligent Portfolios
- SoFi Automated Investing
Most charge 0.00% to 0.40% per year and many have no minimum balance.
Algorithmic Trading (Algo-Trading)
Professional traders and some advanced individual investors use computer programs that follow predefined rules to buy and sell stocks, options, forex, or crypto automatically.
Examples of rules:
- Buy when the 50-day moving average crosses above the 200-day moving average
- Sell 50% of a position when profit reaches 20%
- Trade only between 10:00 and 11:30 a.m. when volatility is higher
Retail brokers that support this:
- Interactive Brokers
- TradeStation
- Thinkorswim (by TD Ameritrade)
- Alpaca (popular with developers)
Automated Rebalancing
Portfolios drift over time. If stocks grow faster than bonds, you end up with a riskier mix than you wanted. Automation watches the percentages and buys or sells automatically to bring you back to your target (for example, 60% stocks / 40% bonds).
Tax-Loss Harvesting (Automated)
The software looks every day for investments that have lost value and sells them to create a tax deduction, then immediately buys something very similar so you stay invested. Humans rarely do this daily; machines do it without extra effort. Wealthfront and Betterment made this feature famous.
Direct Indexing
Instead of buying an ETF that tracks the S&P 500, the computer buys the individual 500 stocks for you. This gives even more chances for daily tax-loss harvesting and tiny customizations (for example, avoid companies you don’t like for ethical reasons).
Copy Trading / Mirror Trading
You pick a successful trader and your account automatically copies every trade they make in real time.
Platforms:
- eToro (very popular for this)
- ZuluTrade
- Some crypto exchanges also offer it
Dollar-Cost Averaging (DCA) Bots
You set a fixed amount (say $200 every Monday) and the system automatically buys no matter what the price is. Most big brokers (Fidelity, Vanguard, Coinbase, Binance) offer free recurring buy features.
Crypto Trading Bots
Very common in cryptocurrency because markets run 24/7. These bots can arbitrage between exchanges, grid trade, scalp tiny price differences, or simply rebalance a crypto portfolio.
Popular ones:
- 3Commas
- Pionex (has free built-in bots)
- Cryptohopper
- Bitsgap
How to Get Started with Investment Automation
- Decide your goal: long-term retirement, short-term trading, or something in between.
- Choose the level of automation you want:
- Hands-off → robo-advisor
- Some control → recurring buys + auto-rebalancing at a normal broker
- Full control but automated → build or rent trading algorithms
- Open an account with the service you like.
- Connect your bank and fund the account.
- Set your preferences (risk level, recurring amounts, etc.).
- Let it run. Check in once or twice a year, not every day.
Advantages of Investment Automation
- Lower fees than human advisors
- 24/7 operation (especially useful in crypto)
- No emotional mistakes
- Consistent discipline
- Automatic tax optimization
- Accessible to people with small amounts of money
Risks and Downsides
- No human to talk you out of a terrible idea (if you set stupid rules, the machine will happily follow them)
- Technology can fail or have bugs
- In extreme market crashes, some algorithms sell everything at the worst moment (flash crashes)
- You still pay taxes on gains (automation doesn’t make money tax-free)
- Over-optimization: a strategy can look perfect on past data but fail in real life
The Future
More and more money moves to automation every year. Big institutions already trade almost entirely with algorithms. For regular people, the trend is clear: simple, cheap, automated portfolios are becoming the default way to invest.
If you literally do nothing else, setting up a robo-advisor or automatic monthly investments into a low-cost index fund is already “investment automation” and it beats what most humans achieve on their own.
That is the entire world of investment automation in plain English, from the simplest recurring buy to the most complex trading bots. You now know everything you need to pick the version that fits your life.