(Newswire.net — April 29, 2020) — Since the mid-1970s, the availability of ETFs and index mutual funds has exploded, allowing anyone who is interested to access the highest-quality investments. However, just because it’s possible to access investments doesn’t mean that it’s necessarily easy. You still have to choose which ETFs and mutual funds to use. You still need to construct an investment portfolio and manage it. For anyone who isn’t an investment professional, these decisions are often overwhelming.
Enter the Robo-Advisor.
Designed to make it easier to make wise investments, these automated investment tools create and manage investment portfolios independently so you can simply contribute the money then get on with your daily life. Automated investment sounds like a brilliant idea, but do they have any weaknesses?
What Is A Robo-Advisor?
In brief, a Robo-Advisor is an automated investment platform designed to construct and maintain an investment portfolio on your behalf. All you have to do is open your investment account, respond to a few questions about your risk tolerance and goals, then the platform does all the hard work for you, investing your money in its pre-constructed portfolio.
Robo-advisors usually offer some guidance for would-be investors as well as a slick user interface. You won’t need to calculate the dividend coverage ratio for your chosen stocks or evaluate which high dividend blue chip stocks offer you the best investment opportunity. Rather, you’ll be able to simply sign up, provide some answers then have all the choices made for you.
Why Use A Robo-Advisor?
There are several benefits associated with using an automated investment platform:
- Low-cost, high-quality portfolios – Robo-advisors typically construct their portfolios with index-based, low-cost ETFs. They have been shown to have a great chance of a lucrative outcome.
- Easy to use – Robo-advisors make investment easy. It’s easy to open your account, set up your ongoing contributions, respond to the questions about your risk tolerance and goals, and then to be set up with a portfolio to match your profile.
- Tax-efficient – if you’re making your investments in a taxable account, most Robo-advisors offer services to boost your after-tax returns.
Are There Any Downsides To Using A Robo-Advisor?
While there are many advantages to using a Robo-advisor, there are a few negatives to consider too:
- A Robo-advisor isn’t a financial planner – if you want to devise and implement an investment plan that uses all available financial opportunities and tools to achieve your personal goals, you’ll need a human financial planner on board.
- They’re more costly than other types of all-in-one funds – although Robo-advisors are usually quite affordable, they’re still more costly than the other lowest-cost all-in-one-funds.
- Performance isn’t guaranteed – just like any other type of investment, Robo-advisors can’t guarantee you certain returns.
It’s therefore important to weigh up the pros and cons of automated investment platforms before you make a final decision.
Should I Use An Automated Investment Platform?
Robo-advisors offer evidence-based, high-quality investment portfolios at an affordable price, so anyone can make a wise investment, even with no experience. However, they aren’t perfect. They are more costly than other all-in-one-funds, and they can’t guarantee you financial success and major returns every time. It’s also important to remember that they aren’t financial planners, but rather investment management tools, so you can’t rely on them to navigate a complex financial situation on your behalf. Nevertheless, if you need an easy way of implementing a good-quality investment portfolio, you should certainly consider using an automated investment platform. A Robo-advisor could be the vehicle to facilitate your entrance into the world of investment, and could also be a vital tool to manage and maintain a successful portfolio so you can enjoy boosted profits at the end of every year.