Using a robo-advisor to help with investing is becoming increasingly popular. The robo-advising market is rapidly growing, with nearly 46 million users currently worldwide, and is expected to reach about 150 million users by 2023. The market is driven by many robo-advising companies, such as Betterment, Personal Capital, and Schwab that are offering customers up to 27% return on their investment, this is becoming a highly desired plan for growing money.
Finding the best robo-advisor is important, as you want to ensure that you are making smart investments and earning money. There are many ways to find a robo-advisor, and it is important to contrast and compare those available from different companies before you decide which company to work with.
What is a robo-advisor?
A robo-advisor, simply put, is a service that you can use to help you manage your investments. By using automated investing techniques, robo-advisors can apply algorithms based on your unique situation and help to maximize your investment portfolio.
What are the benefits of a robo-advisor?
Firstly, robo-advisors are often less expensive to use than human financial advisors. Most companies that offer robo-advising to manage your investment portfolio will charge less than 1%, sometimes as low as 0.25% annually. This percentage is applied to your entire balance of assets in your account. Fees may be charged monthly, quarterly, or annually, and are usually automatically deducted from your balance.
Secondly, transaction fees are often waived when you use a robo-advisor. Since these fees can quickly add up with a human financial advisor, this can be a significant benefit, particularly for people who make frequent transactions.
Thirdly, robo-advisors use complex algorithms to determine the right investments for you. When you sign up to work with a robo-advisor, you will create a profile that includes the amount of money you have to invest, how often you intend to make transactions, what your investment goals are, how much risk you are willing to take with your investment, and more. Each of these factors is weighed, and then the robo-advisor is prepared to help you select the investments that are most likely to work best for you. Your portfolio will be developed and individualized for your needs and preferences.
How to choose the best robo-advisor
Many of the best financial advisor and investment companies now offer the option of getting robo-advising. Knowing how to choose the best robo-advisor is important so that you avoid potential problems when it comes to your money. Your hard-earned money deserves to earn more; most people can’t afford to lose money when they make an investment.
1. It is important to work with a reputable company when using a robo-advisor. Avoid the gimmicks and deals that seem “too good to be true,” because they probably are. Investigate the company, read the reviews, and get references when you can. Don’t be too swayed by the lowest fees or special “sign up” deals; this is where many people get burned with investing. Finding out about a company in advance will go a long way when it comes to building a level of trust with your robo-advising company.
2. Start small. Don’t dive in with your entire savings all at once. When you start with a more comfortable sum, rather than every last dime you have, you have the opportunity to learn about how to invest and see your small investment grow. As you get more comfortable, you can invest more – certainly once you are sure that you know how to find the best robo-advisor. Continue adding to the account as you see progress, and you will be more comfortable with the robo-advising strategies.
3. Choose a robo-advisor company that does offer some human support for customer service. If you do find yourself having a problem or some questions, it’s important to be able to talk to an actual person when you need to. A company that offers only robo-advising is selling you short because the robo-advising needs to be a shortcut to the investing process, but not a complete replacement for the human financial advisors available with the typical investment companies.