Editorial Note: The content of this article is based on the author’s opinions and recommendations alone and is not intended to be a source of investment advice. It may not have not been reviewed, commissioned or otherwise endorsed by any of our network partners or the Investment company.
Updated on Friday, January 22, 2021
Ally Invest offers self-directed trading for the DIY investor, as well as automated trading for those who would prefer a robo-advisor approach. Low investment minimums, commission-free stock and exchange-traded fund (ETF) trades and a variety of investment options are some of this online trading platform’s best features.
Trading with Ally Invest could be suitable for both beginning investors who are just getting started with portfolio building and more-experienced investors focused on growing their wealth. There are no physical branches, but that’s typical of many robo-advisors. This Ally Invest review offers a closer look at how the platform works.
|Access to human advisors||No|
|Banking services||Yes, through Ally Bank|
- What is Ally Invest and how does it work?
- Ally Invest investment approach
- Ally Invest fees
- Ally Invest features and tools
- Ally Invest user experience
- Ally Invest safety and security
- Is Ally Invest worth it?
What is Ally Invest and how does it work?
Ally Invest is a robo-advisor that allows you to build a portfolio in one of two ways: You can choose between self-directed trading, if you’re a hands-on investor, or investing automatically with managed portfolios. Investment account options include individual and joint brokerage accounts, as well as traditional, Roth and rollover IRAs.
While Ally Invest does utilize human investing experts to build its managed portfolios, the management process itself is automated — that means you won’t have access to a human financial advisor. But you do get the benefit of a user-friendly trading platform, customer support available by phone and online chat and access to a variety of research tools to help guide your investment decision-making.
- Commission-free trades: Ally Invest charges no commission fees for trades of listed U.S. stocks and ETFs. You also pay no commissions on options trades.
- Varied investment options: With Ally Invest you can build a diversified portfolio that includes stocks, ETFs, options, bonds and mutual funds. You also have the option to trade on margin, meaning you can use borrowed funds to trade.
- Multiple managed portfolio options: If you choose to invest with managed portfolios, you can select one of four options based on your goals and risk tolerance. Those include core, income, tax-optimized and socially responsible portfolios.
- Zero advisory fees: Pay zero advisory fees when you invest in a cash-enhanced managed portfolio. Thirty percent of your portfolio is allocated to cash, which has a variable interest rate.
- No direct fractional shares: While you can invest in fractional shares with stocks that have a Dividend Reinvestment Plan (DRIP), you can’t purchase them directly.
- No crypto or futures trading: If you’re interested in trading cryptocurrency or futures, you’ll need to consider another robo-advisor. Ally Invest doesn’t offer either one.
- Higher account minimum for margin trading: While there are no account minimums for self-directed trading, you’ll need at least $2,000 to add margin trading to your account.
- Advisory fee for market-focused portfolios: Cash-enhanced portfolios have no advisory fees but if you choose a market-focused portfolio, you’ll pay 0.30% annually.
Ally Invest investment approach
|Tax loss harvesting|
|Socially Responsible Investing|
With self-directed trading, you can choose how to allocate your portfolio among stocks, ETFs, options, mutual funds and fixed-income securities. Ally Invest Managed Portfolios are goal-based in their design and construction, and there are four managed portfolio options to choose from:
- Core: Core portfolios are diversified across domestic, international and fixed-income assets. This portfolio is suited for hands-off investors and can be tailored to individual risk tolerance.
- Income: Income portfolios are geared toward investors who want a lower risk profile while enjoying higher dividend yields.
- Tax optimized: Tax-optimized portfolios are focused on increasing tax efficiency. As such, these portfolios lean heavily on low-cost ETFs.
- Socially Responsible: Socially Responsible portfolios focus on companies that are committed to ESG principles. That includes efforts to promote sustainability, energy efficiency and eco-friendliness.
Ally Invest doesn’t offer tax-loss harvesting or smart beta as tax-management tools. However, you can maximize tax efficiency by choosing Tax optimized as your managed portfolio option. These portfolios invest in low-cost ETFs and other assets that offer tax advantages, such as municipal bonds.
Ally Invest fees
- Annual management fee: $0 for cash-enhanced portfolios; 0.30% for market-focused portfolios
- Investment expense ratios: 0.03% to 0.89% for ETFs
Ally Invest is a fee-friendly trading platform overall. On the self-directed trading side, there are no trading fees for stocks and ETFs. You pay no commission to trade options, though there is a $0.50 per contract trading fee.
Load mutual funds have no commission fee, while no-load funds have a $9.95 commission to buy or sell. Bonds and treasuries trade at $1 apiece, while CDs trade for $24.95 per transaction.
What you’ll pay to invest with managed portfolios depends on whether you choose a cash-enhanced or market-focused option. A cash-enhanced portfolio keeps 30% of your account balance in cash, which earns a variable interest rate. There’s no advisory fee for this option.
If you go with a market-focused portfolio, you’ll have a much lower cash allocation of roughly 2%, but you’ll pay a 0.30% annual advisory fee. It’s important to consider what type of trade-off you’d prefer: No fee with more of your portfolio devoted to cash, or a lower cash allocation with an annual fee.
Ally Invest features and tools
Easy cash movement
Ally Invest doesn’t offer a cash management account option, but you can easily move money between your Ally Invest account and deposit accounts with Ally Bank.
You can transfer up to $250,000 per day from an Ally checking, savings or money market account to your Ally Invest account. Transfers can be completed in minutes, allowing you to move money quickly if needed. Plus, depending on which type of account you have with Ally Bank, you may earn a competitive interest rate on your deposits.
Dividend reinvestment programs (DRIPs) allow you to reinvest dividends into additional stock shares, including fractional shares. Though, again, you can’t purchase fractional shares directly with Ally Invest.
Ally Invest does, however, offer dividend reinvestment for eligible securities. You can enroll in this feature for all eligible securities automatically, or pick and choose specific ones for dividend reinvestment. Holding dividend-paying stocks in your portfolio can be a simple way to build wealth over time if you aren’t relying on dividends for income.
Powerful trading platform
Ally’s trading platform helps with building a portfolio, and its featured tools include watchlists, ETF screeners, research and market data and investment calculators. Features are customizable, so you can use the ones you need without getting distracted by the ones you don’t.
Ally Invest user experience
Ally Invest also has customer support available to you in case you run into a problem. The live chat feature is a plus, as not all online brokers allow you to connect with customer support this way. Initiating a test chat revealed a very quick response time.
Help is also available by phone at 855-880-2559, or you can send secure messages via email. Ally also has an online Help Center, where you can find answers to basic account management questions.
Ally Invest safety and security
Ally Invest is a member of the Securities Investor Protection Corporation (SIPC), which insures investors up to $500,000 (the limit for cash claims is $250,000). Ally Invest‘s clearing firm, Apex Clearing, offers an additional policy to supplement SIPC coverage. This coverage, which has a $150 million aggregate limit, kicks in when SIPC coverage limits are exhausted.
Online security tools
Ally Invest uses a number of tools to keep customer accounts secure online. Those include firewalls, Secure Socket Layering (SSL) and secure encryption. While Ally Invest doesn’t specifically offer two-factor authentication as a security measure, you may be asked to provide security code if suspicious login activity is detected.
Is Ally Invest worth it?
Ally Invest could be appealing to investors who are comfortable making trades on their own, as well as those who prefer a managed approach. The low investment minimums make it easy for investors to get started, while commission-free stock and ETF trades should appeal to the cost-conscious.
One advantage Ally Invest offers over other robo-advisors is the lack of an advisory fee if you choose the cash-enhanced portfolio. But again, it’s important to consider whether taking a larger cash position in your portfolio to avoid a fee makes sense.
Alternatives to Ally Invest
|Account minimum||Annual fee||Accounts offered|
|Ally Invest||$0 for self-directed trading; $100 for managed portfolios||$0 for cash-enhanced portfolios; 0.30% for market-focused portfolios||Individual brokerage accounts|
Joint brokerage accounts
|Robinhood||$0||N/a||Individual brokerage accounts|
|Wealthfront||$500||0.25%||Individual brokerage accounts|
Joint brokerage accounts
529 college savings accounts
Ally Invest vs. Robinhood
Robinhood was one of the earliest online brokerages to offer commission-free trades. You can trade stocks and ETFs with zero commissions and no account minimums inside an individual brokerage account. Robinhood also offers options trading, but you can’t trade mutual funds, bonds or forex through the platform.
Robinhood doesn’t offer managed portfolios the way Ally Invest does, but there are some elements here that might appeal to newer investors. When you open an account with Robinhood, you can invest using fractional shares with as little as $1. You can also use a cash sweep feature to earn interest on unused cash balances in your brokerage account.
Ally Invest vs. Wealthfront
Wealthfront is designed for passive investors who want to build wealth over time with low advisory fees. You’ll need $500 to open an account with Wealthfront, which is higher than the $100 required for Ally Invest, but the annual advisory fee is slightly lower, at 0.25%. Again, you could avoid this fee with Ally Invest by choosing a cash-enhanced portfolio, although the rewards from a cash-heavy portfolio may not be worth it.
You can’t purchase fractional shares with Wealthfront, similar to Ally Invest, but you do get the benefit of tax-loss harvesting. Wealthfront also offers smart beta once your account balance reaches $500,000.
All information included in this profile is accurate as of 1/22/2021. For more information, please consult Ally Invest’s website.
The “Find a Financial Advisor” links contained in this article will direct you to webpages devoted to MagnifyMoney Advisor (“MMA”). After completing a brief questionnaire, you will be matched with certain financial advisers who participate in MMA’s referral program, which may or may not include the investment advisers discussed.