As discussed in the last article, technology has changed a lot about our lives. None of us would have thought a decade back that we would be talking about something called Robo-advisor. Well, we are not only talking, but thousands of investors around the world are using the service. The obvious question for you must be – Is it right for me?
We will talk about Robo-advisors in this article, and based on the information shared, you can decide whether you want to use Robo-advisor or not.
What are Robo-advisors?
Robo-advisors are also known as automated investing services. It uses advanced software and computer algorithms to build and manage your investment portfolio. Robo-advisors can offer a range of services like stock selection, portfolio rebalancing, and risk management. These services can come with little or no human interaction. However, most services have customer support to help you with your queries.
How does Robo-Advisors work?
To decide whether you want Robo-advisor services, you must know how they work. When you sign-up for any Robo-advisor service, the platform will have some basic questions for you. The questions on most platforms are related to your age, investment plans, how much you want to invest, for how long you want to invest, etc.
Based on the data you shared, the Robo-advisor figures out your risk profile and understands your goals. It will also scan all the current stocks and recommend stocks that match your profile. Within seconds, it will create your entire investment portfolio – it is all data-driven – no human emotions driving the selection. Robo-advisors don’t fall prey to emotions, and hence they have a huge edge over traditional financial advisors.
The more advanced ones will also have a risk management system in place and will send you an alert if any company in your portfolio hits a red flag.
When should you use a Robo Advisor?
A Robo-advisor is an excellent tool for someone new to the market. The number one reason most investors quit investing in the stock market after a few months is – initial losses. The losses occur because they start investing without knowledge. No one can make money unless they understand the stock market.
Robo-advisors would be a logical tool to use if you are new to investing and testing the water – you want to see how the stock market works. You want to explore the option of equity investment. You cannot take help from the financial advisor as they are costly. In such a situation, you can start your investment journey with a Robo-advisor.
Financial advisor advice may be biased in some cases. For example, even if you are an aggressive investor, the advisor may not create an aggressive portfolio for you. With Robo-advisors, there is no such biasing. Your portfolio is a true reflection of your risk profile. To your advantage, you can work the other way round, similar to a financial advisor – if you are conservative, you can go with aggressive investments.
If you don’t have too many financial goals and your investment goal is simple – to get returns, Robo-advisors are perfect for you. You seriously don’t have to give hefty fees to a traditional advisor for generating returns.
The best of both worlds
Many investors believe that they have sufficient knowledge to make their investment decisions. At the same time, many investors believe they can do better with Robo-advisors in their investments. Instead of viewing the technology as disruptive, advisors can lean into the technology and make it more powerful with a human touch.
Hence, whether you are a well-informed investor or someone just starting, you can make use of Robo-advisors to add extra armour to your services.
You may be one of those investors who love to manage your own portfolio by doing your own research and analysis. There is no harm in using technology to make a better decision or come to the same conclusion in less time.
The cost of a Robo-advisor
Rob-advisor does come at a cost, but it is much lower than a full-time advisor. When you start, you start small, and you don’t have a portfolio that will make it worth paying and an advisor’s high monthly consulting fee. The best way is to go with a Robo-advisor. In most cases, there are no fixed monthly charges. They will charge you a percent of your total portfolio.
Initially, when your portfolio is only a few lakhs, you pay a very small amount. As the portfolio size increases, the percent charge decreases in most cases. Overall, the cost is very much manageable.
What have you decided?
Before you make up your mind, you must be wondering who is using these Robo-advisory services – what age people? Well, the services are not associated with the age group. Investors from all age groups are using it.
If you think you need a Robo-advisor to make good returns from the stock market without too much effort and cost, Jarvis Invest should be your first choice. You can download our app and get started with your investment. You don’t need to be an expert in the stock market – all you need to be is proactive.
You only need to be clear with two things. How much do you want to invest per month, and what is your investment horizon? Jarvis Invest will take care of everything else.
What are you waiting for now? Nothing should stop you from investing in the market.
