Are Robo-advisors All They Are Cracked Up to Be?

There’s been a lot of hype about robo-advisors in the last few years. As a result, the number of investors turning to robo-advisors as their investment platform of choice has continued to increase. But now that robo-advisors have been stealing some of the investment action for a few years, is there a downside? Are robo-advisors all they are cracked up to be?

1. Simple to Use

Some would say robo-advisors are at a distinct disadvantage to human financial planners because they can’t personalize your investment portfolio as a human would. I say what they lack in human interaction they make up for in many other ways. One such way is in their ease of use. You can check on the status of your investments through the use of your phone’s apps from almost any location within moments. Also, if your phone lacks this ability, you can access your account on your computer instead. When you don’t need the hand-holding you would get from a human financial advisor, robo-advisors offer a great alternative.

2. You Can Start Small

Although some flesh and blood financial advisors do allow you to start small with your initial investment, many do not. As with anything there are exceptions on both sides. However, the majority of robo-advisors have lower minimum deposit amounts than their human competitors. In fact, there is one that has no minimum investment at all. Zero or low minimum deposits make robo-advisors a great choice for younger investors just starting out who may not have the ability to invest thousands. They also hold appeal for older investors who haven’t yet amassed enough money to invest with traditional firms.

3. The Fees are Lower

Because robo-advisors do not need fancy offices in expensively decorated buildings or high paid advisors in pricey suits they are able to make their fees more affordable. Putting it another way, they transfer their savings in overhead back to you the investor. At the end of the day you keep more of your money in your own accounts where it belongs.

4. Auto Rebalancing

It takes extra time out of your schedule and it may also take a meeting with your financial advisor in order to rebalance your investment portfolio when you deal with a regular investment company. When you use a robo-advisor instead, it will rebalance your investments automatically in order to help you remain diversified with your investments.

5. Saves Time

Many of the features mentioned above have something in common. They save investors time and guess work. But in addition to saving time through auto rebalancing and ease of use, robo-advisors do the deep thinking as well. You no longer have to spend hours poring over figures in order to learn about investing on your own. Robo-advisors do all of that for you. In addition, some do offer personalization in order for you to tailor your investments to your individual needs.

6. Prevent Human Errors

Some investors panic at least a little bit when they start to see their investments dip slightly. As a result they may sell too soon. They end up buying high and selling low, decreasing the amount of money they could potentially make if they would simply ride out the low. In addition, they may rebalance too frequently. Robo-advisors eliminate this problem and as a result can usually make you more money in your investments than you could make on your own.

These are some of the reasons robo-advisors have so much to offer investors. When asked if robo-advisors are all they are cracked up to be, I would say they are.

Do you feel robo-advisors are all they are cracked up to be?


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