What Is a Robo-Advisor?

Have you been thinking about investing your money in the stock market in order to make great returns and enjoy a more secure financial future? Then you might have come across the term “robo-advisor” during your research. What is a robo-advisor, and why should you consider looking into one before you invest in stocks? Check out the information below to learn more.

The Basic Definition of a Robo-Advisor

A robo-advisor is a digital platform that could help gather information about clients’ current finances and their financial goals. This is done via online surveys. The robo-advisor will then utilize that data in order to make investments automatically or offer you advice on how to invest your money. Ultimately, these are platforms that are driven by algorithms, making them automated without the need for human interaction. Betterment was actually the first robo-advisor, and you can read this Betterment review to learn more about the types of services that it can provide you.

Why Would You Need a Robo-Advisor?

If you’re the type of person who would rather not have to hire a financial advisor, a robo-advisor might be the next best thing. Also, a robo-advisor might even be a good choice if you simply don’t have the resources to hire an advisor, as the fees to use a robo-advisor are typically more affordable than hiring a person. Plus, for someone who takes a do-it-yourself approach to just about everything, including financial investments, a robo-advisor could be the ideal tool that could help you choose the right stocks and make your trades for you. That’s because a robo-advisor will not only select the most appropriate investments for you automatically, it will also help to diversify your portfolio and make necessary changes on an ongoing basis.  

What Else Can Robo-Advisors Do?

There are different types of robo-advisors, so you can find the one that will give you the specific services that you need.   

Here are a few features that you can expect from the top robo-advisors available:

• A robo-advisor should be able to rebalance the various types of investments in your portfolio. In other words, if it finds that some investments are not in line with your goals, it will end up selling and buying shares, as needed, until your portfolio is balanced according to your needs and preferences again. So, for example, if the proportion of stocks versus bonds in your portfolio gets too high, the robo-advisor will sell stocks and/or purchase more bonds to create the right balance again.
• Some robo-advisors will help you find the right human financial advisor who can answer your questions, but you might need to pay more for this particular service. So, even though the majority of your investment strategy will be automated with a robo-advisor, you could still get advice from a financial advisor whenever necessary.

If you are interested in using a robo-advisor, you certainly aren’t alone, as this is a great tool that you can use to start investing without having to do all of the legwork.