Over the past decade, digital investing platforms known as robo-advisors have grown in popularity, aided by the emergence of several new fintech startups.Robo-advisors like Betterment use algorithms to give you investment advice or to invest for you automatically — all with little or no human interaction.
When you set up an account with a robo-advisor, you’ll provide detailed financial information along with your short- and long-term goals as well as how much risk you want to take. The algorithms use this information to invest for you or give you financial advice.Robo-advisors also base their investment decisions on current market conditions. For example, if the stock market goes up, your robo-advisor might sell some of the stocks in your portfolio and invest the money in other assets.
Robo-advisors have a couple of key advantages: Because they don’t have to employ many people, they typically have lower fees and lower account minimums than traditional investment advisors. Some robo-advisors like Betterment, Wise Banyon, and Bloom even have no account minimums.Meanwhile, Betterment has a digital plan with a fee of just a quarter of one percent, while traditional advisors tend to charge at least 1%.Of course, robo-advisors have drawbacks. For one thing, you can’t rely on a robo-advisor to do complicated financial planning or to give you legal advice. Moreover, a robo-advisor won’t be able to give you the kind of nuanced financial advice that a human being might be able to provide.Perhaps that’s why companies like Charles Schwab are launching hybrid robo-advisors — companies that automate certain features of financial planning but let you talk to a human being when it makes sense for you.
link: https://finance.yahoo.com/news/money-basics-robo-advisor-183836067.html
