Would you like to invest for your future but don’t want all the hassle of talking to financial advisors and being pressurized into taking on whatever it is they are keen to sell you for their own commission? If this sounds like you, perhaps you should think about robo-investment?
Robo-advisors are fully automated services that enable you to create an investment portfolio with a few clicks of a mouse button. All you have to do is to complete a simple online application. As well as collecting some basic personal details, this quick application process (it takes only a few minutes) is designed to establish what your appetite for risk is.
Putting risk into perspective
You shouldn’t get too worried about the word “risk.” However, you do need to be aware that with any investment, there is always a degree of risk. Investments can go down as well as up.
Once you’ve completed the application form, your investment portfolio will be designed with immediate effect, specifically to tally with your attitude to risk.
Generally speaking, the more risk you are prepared to accept; the more interest your portfolio will earn. Your portfolio will consist of funds invested stock and shares and/or ETFs. As you know, stock and share prices are set on a daily basis, and they can fall as well as rise. That’s why many leading financial advisors, like industry leader Betterment LLC, create investment portfolios using ETFs (Exchange Traded Funds).
In essence, ETFs are baskets of stocks (similar to mutual funds) that can be traded like stocks. A particular ETF comprises of several different funds across numerous companies and a diverse range of industries. This diversification gives them more stability. They are cheap to trade; indeed some brokers, like Charles Schwab, allow investors to trade ETFs via them for free.
As well as the increased stability that the ETF diversification factor delivers, the other thing investors need to be aware of, in terms of risk, is the investment period. Stock markets do crash from time to time, but they always bounce back and resume making gains. The longer the term your investment is spread across, the lesser the risk. Basically, if you can afford to ride out any storm (if one happens), your investment should be a lot safer.
The global spread of robo-investing
Robo-investing started here in the US; in fact, it was Betterment LLC (whom we mentioned earlier) that launched the first robo-advisor service. Robo-investing has since spread all over the world including Europe, where there are many excellent robo-advisors too; companies like Moneyfarm, Nutmeg and Wealthfront.
Some people are a little reticent when it comes down to trusting others with their money; especially when those others are robots – or algorithms to be more precise. But for those investors who want to invest in their futures without any hassle, robo-advisors could provide the perfect vehicle.
The onward march of the robo-advisor
Like any other vibrant industry though, the robo-investment sector can’t afford to site on its laurels, and indeed they don’t. Many of the leading robo-advisors have now brought human advisors into the equation. They are not too active because this would destroy that no-hassle ethos. But they are there if you feel you need them, and their primary responsibility is to keep an overview of the algorithms and client portfolios, to ensure they are performing on target.
According to a recent article on the CBI Insights website, rob-advisors are now the biggest of the sub-category of financial businesses in the so-called “wealth-tech” sector, having now raised more than $1.32 billion across the planet. This accounts for approximately one-third of sector funding.
If you’re looking for an easy life regarding investing for your future, perhaps robo-investing is the right platform for you.