If you haven’t heard about robo-advisors then you need to read this article. Robo advisers are big in the US and Canada and have had some success in Italy and Germany too. Interestingly, in these markets they tend to get great press: they are branded innovators, trailblazers, delivering portfolio management services once reserved for the moneyed few to the masses.
Here’s how they work: Robo-advisors are computer automated investment platforms which will trade on your behalf. Now while there are plenty of Expert Advisors or EA’s trading the forex markets they are nothing like a robo-advisor. If you are new to trading you will not have figured out that trading is 70% psychology and 30% skill, which is why a vast majority of traders fail and give up within the first 6 months. Robo-advisors have no emotion to the trade at all and therefore are the perfect method for new investors.
When you sign up you will be asked a few questions done via a survey about your age, retirement goals and risk tolerance and from this the robo-advisor will put together an optimal portfolio for your goals and automatically manage it to stay on track over time. Robo-advisors generally cost less and offer more than a traditional investment advisor, but take out the one-on-one human element from the equation. This leads to more objective and lower cost investment services, a big win for retail investors.
Robo-advisors have a range of portfolio sizes and objectives which is a great way to manage your money with relatively low risk and low fees. As robo-advisors charge fewer fees, offer tax loss harvesting and choose time-tested index fund strategies to help you reach your goal as efficiently as possible they are fast becoming the norm within the investment realm these days.
Like anything in life, it’s not what you know but who you know, so if you know a good investor that can guide you to the right robo-advisor half your battle is won. If you don’t know anyone, be on the lookout for fees, tax loss harvesting, investment fund fees and the track record of your top choices compared to major market benchmarks, like the S&P 500. See below for a few of my favorite Robo-Advisors.