Intelligent machines and AI are used more and more to help people solve their everyday problems, and that includes investment advisory! Learn more about robo advisors and how they can help you invest better.
Have you ever imagined you could receive precise investing advice from a robot? Thanks to the evolution of technology and AI you can now save time and improve your investments by receiving guidance from a Robo advisor.
Read more and learn about the pros and cons of turning to a Robo advisor!
First things first: What exactly is a Robo advisor?
These are investment platforms that count with coded programs aimed to help you improve your financial decisions and achieve your investment targets. Due to the AI predictive software, traders and stockbrokers can make investment decisions easier and in a more practical way.
Their main function is to offer you financial solutions by analyzing complex market data, understanding trends and patterns, and taking into account external factors that can impact the market.
This means that it can easily check the historical financial performance of hundreds of companies and anticipate market trends for you to plan your trades.
Robo advisors are automated, so they can rapidly analyze investments and can even help you keep up with your diverse portfolio. Moreover, the software learns from its success and mistakes, which means it will get better and better over time.
How do they work?
Robo advisors learn from your investment preferences. How? With the answers, you are requested to present to set up your account.
These questions include your investment goals, risk tolerance and other preferences. Also, you will need to determine the reason why you want to invest, for example, if you want to save for retirement or to buy a house.
Then, the program will suggest a portfolio based on your answers and will include a combination of traded stock, mutual funds, bonds and ETFs. If you approve the portfolio you can start trading by making an online deposit or transfer to the account.
Bear in mind that you will be charged a fee for using the Robo advisor platform. This will be apart from the commission you will have to pay the brokers for trading.
Pros & cons of Robo advisors
Robo advisors can be the best option for those who are taking their first steps in the investing universe and for those who can't waste time to monitor their portfolio.
Although their automated system allows you to avoid risks, they aren't able to handle long-term goals and needs as well as a financial advisor can.
Another downside of Robo advisors is that you can't communicate with them as you can with your financial advisor. This can lead to investors making bad decisions that a human advisor may be able to prevent.