Robo-Advisors: Are They Your Best Bet?

These days there are more options than ever before to get started with investing, and accessibility is at an all-time high. A lot of people tend to shy away from investing for various reasons; such as financial ability, fear, skepticism, and even misinformation. Thankfully we now have Robo-investors which can help ease some of that fear and skepticism, as well as teach beginners. 

These algorithm-based automatic investing agents are becoming very popular and a safe bet for those who are new to the investing game. Take a look at this Betterment review to see just how far they have come. Yet, as with everything on the marketplace, there are pros and cons to using Robo-advisors, and it is important to understand what you are really signing up for.

Advantages

They Are Inexpensive

For a long time fees were a major concern for investors, as the person who is handling your money normally took a percentage. Even one percent of your entire portfolio is going to be a hit when it comes to retirement. Robo-advisors has made these fees relatively harmless, and some of the platforms don’t charge any fees at all, with certain conditions.

A platform known as M1 offers a variety of upgrades at a premium, but you can essentially invest completely for free with their basic account. There is no minimum balance, no annual fees, and no fees for trades, so you get to keep your money working for you. If you want extras, such as cashback or lower borrowing costs, you can pay an annual fee.

Easy to Access for Beginners

Accessibility is a major concern for something that seems as complicated as investing your hard-earned money in the stock market. There is a lot of trepidation for beginner investors when they look at the big bad world of finance. These Robo-advisors take out the scary middleman in the suit and guide beginners every step of the way to making money on the market.

If you are one of the millions of people who never thought they were ready for investing in the future, you have options now. These platforms are going to be able to take the guesswork out of the equation and teach you the basics of investing while taking care of all the tough stuff.

A Multitude of Options

Every week there seem to be more and more online investment platforms popping up, and that is nothing but a good thing for consumers. When you have a variety of options to choose from, the market is competitive and you can take the time to find the Robo-advisor that fits your specific needs and goals. There are over 200 different advisors in the United States, and that number is going to continue growing.

Proven Trading Formulas

Robo-advisors are going to incorporate the Best Practices Investment Theory in their algorithms which has been in development for decades. Work on this theory has warranted even Nobel Prizes for its contributors, and it is the standard that all of these platforms run on. You can be assured that your money is going to be as safe as you want it to be, depending on your investment strategies.

Disadvantages

There Can Be a Lack of Flexibility and Personalization

With just about anything that is automated by an AI or algorithm, you are going to be lacking that personal touch and flexibility. A lot of Robo-investing platforms have a fairly tough time at helping the individual meet very specific goals, both for the short and long terms. This is where it helps to have a human being to talk to, but things are starting to come around.

Some of these platforms now offer real advisors to chat with if you cannot find the options you are looking for or require some more insight. While this is not really the norm yet, things are progressing slowly, and you will eventually get the best of both worlds.

Price Differences Can Be Inflated

At one point in time financial advisors were the only option for investing, and you had to pay to have your money managed. While it is certainly true that a lot of these Robo-investing services offer much cheaper fees, that doesn’t mean that they are the only ones offering a break.

A lot of advisors have taken major notice of these online tools, and they have changed their costs accordingly. You may not have to give up one percent of your entire portfolio, you can now find advisors that charge an hourly rate, fees for each trade, or much smaller percentages on the whole. Make sure that you do your research before making any major financial decisions.

Don’t Rush Your Decision

You are going to have a lot of different options to choose from when it comes to investing your money. Whether you are looking at short-term major purchases, or long term retirement goals, Robo-advisors are available to help. While they may not be perfect and lack that personal touch, they have a proven track record of helping new investors.

Make sure to take your time, research the platforms that are available, and make the decision that best suits your individual needs. There is going to be the right option for everyone. It is time to get out there and start making your money earn more money, as you work hard and you deserve to meet your financial goals. 

Image source: Kevin Smith, via Flickr.