Should You Use Robo-Advisors to Help You Invest?

Should You Use Robo-Advisors to Help You Invest? Picture shoes human like robot

Even before the pandemic, people around the world were interested in the organizations that provided them with the connected devices and technologies they used on a daily basis. These days, in the face of an ongoing global health crisis, this interest has grown exponentially. It has even evolved into different forms of interest.

In fact, this growing interest in tech has not only helped the Nasdaq Composite finish off the month of July with a 5.6% increase. It has also encouraged businesses to bolster their digitization and automation initiatives in order to reap a myriad of benefits.

For instance, in the field of finance, the integration of IoT technology into capital markets can spell greater opportunities for growth and profit, as well as better service delivery. After all, IoT tech enables customers to conduct transactions using portable gadgets such as mobile phones and smartwatches. Consumer demand for smaller wireless devices involves the use of PCB antenna design software. It reduces any physical footprint and cost while maintaining overall performance. A strategic antenna design enables these devices to relay information through internet-based communication.

Just as the demand for smaller connected devices has grown because of how easy they make monetary transactions, so too have robo-advisors seen a rise in popularity. Within the investment industry, robo-advisors are growing more prominent. This is due to the promise of making investment ventures a lot easier, among other reasons.

What is a robo-advisor?

a robodavisor is not an actull robot but rather an application

In its simplest sense, robo-advisors are automated investment platforms that manage the construction and maintenance of an investment portfolio for you. You can think of it as a one-stop-shop for your entire investment portfolio. Despite its somewhat futuristic name, there are still humans in charge of constructing the portfolios. They program all the decisions and choosing the underlying funds. The ‘robo’ in the robo-advisors just means that these platforms are taking advantage of up and coming technologies while maintaining portfolios.

The things that make robo-advisors popular

More than simply automating the process of developing a portfolio, robo-advisors also create high-quality portfolios. Instead of banking on high-cost indices, robo-advisors stick with low-cost index funds. They can potentially give you an 80% to 90% chance of outperforming anything else. To make things even better, these digital advisors stock up their portfolios with exchange-traded funds (ETFs). These are instrumental in minimizing risk.

After all, a diversified portfolio ensures that investors are not putting all of their eggs in one basket. They are instead of spreading them across the entire market. In some cases, firms that offer robo-advisors also perform portfolio rebalancing for free — a service that could otherwise cost you a lot if performed by a regular investment advisor.

The things you should be aware of

While robo-advisors are usually relatively cheap, they still cost more than the lowest-cost all-in-one funds available at the moment. Meaning to say, there are other cheaper ways to get an all-in-one portfolio besides using a robo-advisor. In addition to this, like any other investment, robo-advisors expose you to just as much risk as any other investment venture.

Despite being advertised as a replacement for financial planners, robo-advisors are only as good as the portfolios they curate. At the moment, robo-advisors are not yet capable of helping clients create and implement a plan. Specifically, a plan that considers all of a client’s financial tools in attaining a specific goal. Therefore, you would still need the guidance of a financial advisor from time to time.

In summation, if you have an interest in trading but don’t have the funds to attain the services of a professional, and also want to do away with the intricate and (often) intimidating process of investing, then a robo-advisor might be the perfect option for you. However, it is important to remember that robo-advisors are mere investment management tools and not financial planners. They do not ensure investment success and do not offer help in navigating your entire financial situation.

  • Support
  • Platform
  • Spreads
  • Trading Instument

For more news updates, visit our homepage now and see our latest news article. Want to learn more about trading? Visit our education page now and learn for FREE!

Leave a Reply