A Short Beginner’s Guide
Automation makes life easier. Will it do the same with our financial decisions as well? For the “betterment” of the world, change is necessary. And, investing can now be done by yourself and a robo advisor.
Automated investing, how does it sound to you?
So to stop you from getting too skeptical, keep reading to find out.
What is a Robo Advisor?
Robo advisors are a category of a financial adviser. But, that provide financial or investment management online. These are digital platforms with automated. It uses mathematical rules and algorithms to come up with financial plans.
A service that has little to no human intervention.
Furthermore, robo advisors can also need the help of a human investment expert. For services like taxes, retirement or estate planning.
It gathers important information from clients. Most especially on their financial status and future plan. This is provided through the platform or online survey. All the details are the basis of the advice it produces. Or, the system automatically invests on behalf of the client.
Yet, there are actually many definitions of what a “Robo Advisor” is, it is the simplified version we can give out.
How did it start?
This isn’t born yesterday, let us take you a little back to history.
The science behind this robotic technology is not new. It has been used by human wealth managers. To automatically distribute portfolio in early 2000’s. And, only those few financial experts can afford to buy that mechanization.
Hence, ordinary people had to seek financial advisors for their services. And take advantage of that cutting-edge invention.
Betterment, an investment company launched in 2010, is the first robot-advisor. It was a simple online system to help investors manage investments. From then on, they have altered the entire way on how it was. Today, it has progressed into something that is capable of doing more complex tasks.
The industry has emerged. And many are getting on the bandwagon of automated investment platforms. Offering a range of attractive services. As well as low-cost preferences for the different class of investors.
So, why is it a better option?
Again, a robot-advisor is an online system provides portfolio management service. That is automatic. Since, it uses computer algorithms, based on the risk tolerance and term you have provided. Plus, it can provide services which are lower than those of a human financial advisor.
Besides, the automatic portfolio rebalancing. It also assists in tax-loss harvesting. Both factors will convert into the higher potential of returns. Sounds, good business?
Is it best for me?
It depends on your personality as an investor. Automated investment can be a good fit. If you choose to be a tolerant or a noninterventionist to your funds. This would mean that you let some else boost your portfolio.
And, the most important thing to consider. Before jumping into automation – must have simple transactions. You need to make sure that your financial situation is not complicated. As complexity would need direct handling of a human advisor.
Investments, in general, would range from linear to complex. If we cannot make a better decision for our financial plans. Then seeking a human financial advisor is a good idea. Making sure that they can provide us the best of your interest.
The services and options they will have to present should be understandable and wise. They are experts on what they do, so they must be.
Automated investment is even a better option, too. A robo-adviser may not equally function as human financial experts. But factors of being “personally attached” to the business is eliminated. Emotions play a vital role in our decisions, most if we get emotional, we may not be rational.
Capital spending is coupled with risk. Automated or with a human expertise both tag along financial exposure. If you gain, someone got a loss and vice versa.
Calculated and well-managed risk. These are elements that help an investor get through and recover.
So, analyze and learn more about robo advisor if it is a good fit for your personality and financial status. And, if it creates an intelligent portfolio grow, then why not? Yet, if you have concerns and hesitations, talking to a financial expert may help you decide.
To learn more, read Best Robo-Advisors: 2018 Top Picks.