79% of the people quizzed by Accenture confirmed that they would be more than willing to use Robo-advice in making investment allocation choices. While the concept of Robo advisers is yet to go completely mainstream, it has a lot of benefits in store for the everyday investor. No, Robo advisors have nothing to do with robots if that’s what you are thinking. Robo advisers are online based investment platforms that utilize machine learning and algorithms to help investors in investment management with minimal human intervention.
Other than helping to highlight the best possible investment paths, Robo-advisers can assist investors in identifying key changes in the financial world and making decisions that will further increase their chances of achieving their financial goals. For example, it might suggest debt consolidation to an investor with multiple debts to allow them to raise their creditworthiness. In the process, the investor can enjoy an improved credit score and a higher investment potential. Here are three ways Robo-advisers can help you achieve your investment goals.
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Reduced Investment Costs
Human financial advisers can be expensive to deal with. They will typically ask for a percentage commission on your investments while still demanding high minimum balances. Robo-advisers, on the other hand, offer reduced costs in terms of investment advice and have low minimum balances. By making the investment advice available to almost any investor, this encourages an increase in the levels of quality investments. With the ever-increasing examples of successful AI applications, solutions like Robo-advisers are set to increase competition in the investment management industry, while ensuring a reduction in investment costs and an increase in quality investments.
Promoting Financial Information Symmetry
There is no problem if you would like to manage your own investments, as long as you are aware of what needs to be done. However, a good number of people, especially millennials who are great at saving but reluctant to invest, have little knowledge of how the financial world works, and, therefore, cannot benefit from the perks of financial education. With little understanding of complex financial acronyms and capital gain laws among other financial aspects, most people have no other choice but to rely on financial managers. More times than not, this exposes them to financially biased information, as some advisers tend to pitch sales ideas through which they can earn a commission.
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With Robo-advisers by their side, investors can get to manage their investments without the need of a financial adviser. All the individuals will need is to provide some information about themselves, such as their target retirement dates and risk tolerance rates. The Robo-advisers can then use that data to help them make wise investment decisions. Additionally, investors can benefit further by integrating smart budgeting ideas to make savings as they consider what assets to add to their investment portfolio.
More Effective Portfolio Rebalancing
If you put 30% of the portfolio into stocks while allocating the remaining 70% of it to bonds, the chances are that within the next half-decade, the percentage ratio of your portfolio will be different. While some investors might argue against portfolio rebalancing, it can present a diversity of benefits to achieving your investment goals. For instance, if you’re in the process of sourcing startup investment opportunities, it can easily help in striking your desired balance between the risks and returns from your investments.
Conventionally, portfolio rebalancing used to be a manual process. You would have to part with some commission when buying and selling assets with the aim of bringing your portfolio back to the target alignment. By reducing costs and making the manual process obsolete, a Robo-advisor can help rebalance your portfolio through automated transactions.
The Robo-advisor industry is just building its foundation. With further developments in the field of AI, investors will have much more to expect from these virtual advisors. Feel free to use computer-assisted investing to reap the above and more benefits.
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