Today, technology plays a vital role in the world of finance management and investment. Automated investing is now a thing, with investors having the option to work with robo-advisors instead of human advisors with their investment portfolio.
Robo-advisors are online investment management services that utilize AI and algorithms to assess and provide financial status and advice with minimal to zero human intervention. Further, they use online questionnaires to obtain vital information about the client’s degree of risk-aversion, financial status, and investment profile. Using their algorithms, they also assist clients on strategic fund allocation and portfolio management through easier and more efficient means.
Now, why do people consider this option and what are the top benefits of robo-advisors? Read on.
Robo-advisors can be considered as low-cost alternatives to traditional financial advisors. Since using tech eliminates human labor, these online services are less costly with an average annual flat fee of 0.2% to 0.5% of a client’s total account balance. As when investors work with human advisors, a typical rate of 1% to 2% or even more is charged.
Further, this factor also allows robo-advisors to have zero to low minimum balances as compared to the amount required by financial planners. This, in turn, helps automated investing become more accessible even to investors with a small net worth.
As mentioned, one of the benefits of using robo-advisors is its accessibility.
Some people may not have considered seeking financial advice from professionals due to financial commitments. The good thing with robo-advisors is that they can be accessed online. Since a lot of younger professionals are also entering the world of investing, automated means is one way to go.
Easy to use and secure
One of the benefits of robo-advisors is that they add value to different types of investors by allowing them to invest in any various asset classes conveniently. How convenient? They can do this using their mobile phones or even web applications. In addition to that, these automated investing services also provide access to portfolio management tools, which allow for more flexibility and security to users.
Efficiency is also another attractive benefit of robo-advisors. Before, clients wanting to execute a trade have to call or meet up with their financial advisor, discuss and explain their needs, fill out a bunch of paperwork, and wait. Now that robo-advisors are in place, investors can do all of those in just a few clicks wherever they are.
Now, with all these benefits, you might wonder: Are robo-advisors really safe? In fact, the answer depends. Automated investing through robo-advisors can neither be safe nor risky. Why? The risk rate of a portfolio managed by a robo-advisor depends on your preferences as an investor. By assessing every investor’s risk appetite, robo-advisors can curate personalized portfolios and make the whole process more targeted to your needs and goals.
To further guide you, here are some misconceptions about using robo-advisors so that you can avoid them and become a more responsible and informed investor.
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