Finance
Automated investment services, or Robo-advisors, have become more common these days. Many financial services firms now have their own automated investment services. There is no doubt that the introduction of Robo-advisors has made investing an affordable financial option for many. But automatic investing also has some disadvantages. So, before you decide to choose the best automated investment service, take a look at its pros and cons.
Advantages Of Using Robo-Advisors
Low Fee
Low management fees are one of the biggest benefits of choosing a Robo advisor. Big names in the financial sector, such as Charles Schwab Corp. smart portfolios, offer robo-advisors for free, while some financial institutions, such as Betterment and Wealthfront, charge a low 0.25% management fee.
Quality Investment Portfolios
The algorithms used in some of the best automated investment services, such as those offered by Betterment, support Nobel Prize-winning investment models. These models are designed to provide the highest return on investment with the lowest risk.
Access To A Financial Advisor
Many traditional financial services firms now use Robo-advisors to select assets for their clients’ investment portfolios. This allows them to provide financial advisors to their clients to help them with taxes, loans and any financing or investment.
Easy To Use
Robo-advisors make the entire investment process very quick and easy. With robo-advisors, all you have to do is answer a few questions about your financial goals, risk tolerance and capital, and the algorithm will create an investment portfolio that fits your needs.
Small Minimum Balance
Even low earners can enjoy professional advice through Robo-advisors. Several investment firms, such as Betterment and Ellevest, offer access to the best automated investment services even with a zero balance.
Disadvantages Of Using Robo-Advisors
They Are Not Financial Planners
Indeed, the best automated investment systems can outperform financial planners when it comes to creating pure profit portfolios. However, a robo-advisor cannot understand your short- and long-term goals and financial concerns like a human financial advisor. A good financial planner will understand your financial goals and help you build a portfolio that will help you achieve your future retirement goals. Financial planners are especially useful when the market is not performing well.
They Can Be Restrictive
Robo-advisors cannot go beyond their pre-programmed questions when building an investment portfolio. They can also be limiting if you’re looking for more complex investment strategies and can’t trade on your own terms. Many sophisticated investors require a larger investment portfolio with different asset classes, which may not be possible even with the best automated investment systems.
