What Is Robo-Investing And How It Works?
Updated: May 15, 2021
Investing is considered one of the best ways to grow your money and achieve the goal of financial stability especially after your retirement and there is no denying it. But many times doing that investing can be time-consuming and overwhelming because the market is full of investing options whether it's stocks or other options like mutual funds, ETFs, or bonds and it's challenging to make an informed decision about what's the best option for you. To solve this problem of yours, enter a smart helper called Robo-Adviser which will manage and allocate your stock market assets for you with the help of some computerized algorithms.
Robo-Advisor firms have been in trends for the last 5-6 years and are popular among venture capitalists. Robo-investing is also gaining good traction among the investors because of its ability to maintain the stock portfolio and saving money which they used to pay to an investment adviser or financial planner.
How does Robo-Investing work?
In Robo-investing, instead of investing in stocks or assets by yourself, you allocate the job to a portfolio management company which then invests, makes appropriate changes, and rebalances your assets through an automated process powered by computer algorithms. Sounds a little bit tricky? Let's get a general understanding of its working.
1) You share the Robo-adviser, the details of your investment goals, and how much risk you are willing to take, in order to earn hefty returns.
2) Then an investment portfolio is created based on the information provided by you. This investment portfolio is created using some computer algorithms which can vary from service to service.
3) Then just sit back and let the company take care of the part of investing for you. No headache of spending hours and hours in stock market research. Depending on the specific service, you may or may not have more control over the individual assets you invest in, so understand them before committing anything.
Remember Robo-advising companies will charge you a fee for their services but this will be minimal if compared to hiring a financial helper.
So what’s the trick? The thing is that, when you hand over your assets to Robo-Adviser, you will lose some of the flexibility that comes with managing your portfolio on your own which might not be a good thing from the point of view of a seasoned investor but will not have any problem, if you are too overwhelmed by the whole process of portfolio management.
The market has a lot of options to choose from when it comes to Robo-investing, but some of the best Robo-Advisors in the market at the moment are Betterment, Wealthfront, Scripbox, Sofi, Ellevest, etc.
Well, we hope that after reading this post you will be interested in exploring more about the Robo-Investing. Thank you so much for reading this post, please feel free to leave your feedback.