Online Platforms and Robo-Advisors
Online services and robo-advisers are instruments which enable effective investments with less interaction with a human professional. Such platforms have been introduced and embraced because of the low charges in addition to-how they operate and the accessibility that they come along with.
What Are Robo-Advisors?
A robo advisor is a form of an online based investment advisory firms that utilizes technology to design and manage an individual’s investment portfolio according to his or her risk profile as well as investment objectives. At the end of a certain set of questions a robo advisor will suggest a portfolio with a diversification, frequently utilizing low cost exchange traded funds or index funds.
How Robo-Advisors Work
- User-Friendly Interface: Generally, robo-advisors have an intuitive user-facing design, where the client enters information about himself, his financial objectives, his capacities to lose money, and his preferred asset types.
- Automatic Rebalancing: Robo-advisors manually adjust the proportions of different investments held in your portfolio towards the intended mix of the asset classes.
- Low Fees: Another major selling point of robo-advisors is fee: they are cheaper than traditional financial advisors, so they are more suitable for investors with little money to invest.
- Tax-Loss Harvesting: All the robo-advisors that we have reviewed here provide tax-loss harvesting, which is the act of selling off depreciated investment at a loss as a way of lowering your tax liabilities.
Betterment, Wealthfront, and SoFi Invest are some of the most famous robo-advisors now. These platforms are especially profitable for those investors who do not strive to have direct control over their investments, but at the same time can afford to address highly qualified experts and receive individual support, as well as an individual approach to the management of his investment portfolio at a fairly low cost.
Benefits of Online Platforms and Robo-Advisors
- Low Minimum Investment: Most robo-advisors allow the client to invest as little as possible, or even nothing at all if they are a new investor or they have little capital to invest.
- Diversified Portfolios: With robo-advisors portfolios are diversified to are able to spread out the risks in order to ensure the greatest returns possible in the future.
- Automated Investment Management: Such platforms help save a lot of time as they have to rebalance your portfolio and automatically reinvest the dividends.
- Transparency and Low Costs: There are upfront fees disclosed by online platforms and robo-advisors, which are normally cheaper to those of a human financial advisor.
When to Use a Robo-Advisor
Robo-advisors are best suited for investors who:
- Looking for an easy and inexpensive way to handle investments.
- Fear of additional costs of maintenance preferred to model with less frequent contacts with the regulator.
- Do not have complicated and are not always in need of financial planning services for their investments.
Common Challenges in Investment Management
Indeed, as with any other field, investment management has its own unique and oftentimes complex difficulties, which if addressed or not, may hinder a strategy. Knowledge of these factors is necessary to think strategically and maintain control of your investment portfolio. Below, we explore some of the most common hurdles faced by investors: These include fluctuating markets, use of emotions in making decisions and hard-to-find fees and charges.