Sage Advice for Making the Right Investments
As a relative greenhorn to the investment world, picking the right financial instruments can be overwhelming. The current state of the global economy is best described as cautiously optimistic, and it is characterized by steadily increasing interest rates vis-à-vis quantitative tightening. While the tide has turned against low-level interest rates, the federal funds rate (FFR) is currently low enough to warrant consideration of investments outside of the traditional banking sector. As a novice investor with excess funds available, it is foolhardy to plow hard-earned money into a low-interest-bearing account. The rate of return on CDs (certificates of deposit) is barely enough to keep pace with inflation, let alone capital appreciation.
Investors understand all too well why inflation is a real concern in today’s economy. For starters, the trend of general price rises does not bode well for low-yield investments. CDs are a poor choice for many reasons, not least of which is the fact that they lock capital away for an indefinite period of time. In the days of old, trading and investment activities required a significant understanding of the financial markets. Nowadays, finance and investment skills are not a prerequisite for success. Professional advisors typically take a hefty commission for services rendered, but they are expensive and their services are typically only available to high-value net users. Fortunately, the technological advancements in trading and investment have facilitated a string of affordable robo advisors.
Robo Investment Services
There are multiple robo investing platforms available, including Betterment. This company is a reputable organization and it prides itself on personalized advice for investment purposes. No two investors are alike in every way. Their needs and preferences change based on their risk appetite, personal disposable income, investment rationale, and a host of other factors. There are ways to reduce the costs of investment services by avoiding institutional, brick and mortar brokerages and opting for credible robo advisors. This form of investing has sufficiently advanced to the point where it is capable of offering exceptional customer support and service, meaningful retirement and investment advice, and providing clients with unimpeded access to authentic customer service representatives.
For example, the Betterment review by Investor Junkie goes to great pains to extol the virtues of this robo advisor and its powerful investing portfolio. Betterment provides a comprehensive set of options to help clients achieve their pre-stated economic objectives. The reasons for investment will range from retirement goals to tertiary education, financing a mortgage, or saving up for an exotic vacation. By planning all of these steps out, Betterment serves as the go-to resource for achieving pre-stated objectives. It does this by using a Modern Portfolio Theory comprising a diverse product offering (commodities, stocks, indices, forex, EFTs, futures etcetera). The greater the diversity in the investment, the lower the risk. This allows investors to generate consistent returns over the long term.
MPT Mitigates Risk with Investments
Consider that the medium-term performance of the stock market has fared well for technology stocks like Amazon, Apple, Google, Facebook et cetera, but the recent downturn in the stock market has capped gains and resulted in reversals. The market’s downturn has been predicted by leading economists, but one of the ways to hedge against this whipsaw activity is through a diversified portfolio comprising bonds, stocks, commodities, forex, indices and the like. This is precisely what Betterment does for investors. Fortunately, there is no need to conduct all the necessary legwork since the robo advisor does all of this automatically.
This is the beauty of Modern Portfolio Theory. Investments in market instruments like stocks, bonds, commodities, and indices are not guaranteed by the FDIC, despite the company being SEC-registered (Securities and Exchange Commission). As a result, there is always an underlying risk with Robo advisors. Fortunately, the minimum investment is $0, and the fees range between 0.15% & 0.25% annually. The accounts are taxable, and 401(k) assistance is available too. New traders and investors typically struggle with picking the right investment products for their needs. With so many thousands of options available, it’s good to know that there are user-friendly investment options to fast-track the learning curve and allow optimal investment practices through automated trading activity.