Robo-advisors are great for people who prefer a hands-off approach to investing. They are an affordable, automated way to grow your money via the stock market. Let’s take a look at everything you should know about robo-advisors.
What is a Robo-Advisor?
Robo-advisors are financial platforms that use your personal preferences and algorithms to invest in the stock market. Robo-advisors are computer programs, thus they are cheaper than using traditional human financial advisors.
How Does a Robo-Advisor Work?
If you’re curious about a robo-advisor, the first step is filling out a questionnaire about yourself and your financial goals. You’ll be asked about your age, your risk tolerance, when you want to retire, and more. The robo-advisor then combines your answers with its algorithm to create your investment plan and portfolio.
Pros of Using a Robo-Advisor
Low cost. Robo-advisors are almost always more affordable than using an investment professional.
Ease of use. When using a robo-advisor, there’s not much you need to do. You contribute money and the program does the work for you.
Cons of Using a Robo-Advisor
Overly simplistic approach. If you have a complicated financial situation or want investment guidance, a robo-advisor may not be fully equipped to meet your needs.
Lack of involvement. Robo-advisors do all the work for you. Does that sound good, or would you rather be more involved in the investment process? If you lean more toward the latter, a robo-advisor is probably not for you.