Should You Invest With Robo Advisors? | Watch This Before You Invest
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In this video, I’ll tell you the pros and cons of using a Robo Advisor, and should you use it to invest or invest yourself instead. Enjoy.
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0:00 – Introduction
1:01 – Pros of using a Robo Advisor
1. Cheaper Investment Management
A financial advisor would cost you 2-3% of your total invested amount. Despite the high fees, it was found out that over the long term, 91% of fund managers underperformed the market.
Then came along the Robo Advisors, which helps you to invest at just a fraction of the cost. It uses the nobel prize winning Modern Portfolio Theory, which uses an investing strategy that has been proven to work, and it gives you the best possible return for a given level of risk.
2. Easy to learn and use
Robo Advisors are super easy to use. You just need to open an account, answer some simple questions, then it will generate a portfolio for you and will automatically do all the investing for you.
3. Gets people started with investing
If you are afraid of investing, using a Robo Advisor is a great way for you to start investing and grow your money.
3:28 – Cons of using a Robo Advisor
1. Lack of control
By using a Robo Advisor, you won’t have control on your investments, for example you can’t add a particular stock to your portfolio. All you can do is choose your risk tolerance and goals.
2. Not learning about investing
By letting someone else invest for you, you are not learning about investing. Important stuff like how to choose a good stock, when you should buy a stock, what kind of stock to avoid. Because if you know these stuff, you will greatly improve your returns.
3. Middleman risk
A Robo Advisor is just a middleman where you give money to it and it helps you to invest. But it has a risk of shutting down. For example a few months ago, Smartly shut down and its users were forced to liquidate their holdings at a potential loss
5:55 – When to use a Robo Advisor
1. You want to get a return on your money, but you are not looking to get rich.
Your portfolio will be super diversified because it contains lots of stocks and bonds. But the more diversified your portfolio is, the more average your returns will be.
2. When you have little money to invest
Robo Advisors charge a fixed percentage fee and some of them do not have any minimum investment amount. You can start invest with even $1 and grow your money.
3. You do not want to manage your investment
If you do not have the time, or do not want to manage your investment, Robo Advisors will help you take care of your investment automatically.
7:39 – When to invest yourself
1. You want to control your investments
Robo Advisors do not allow you to control how you want to invest or what kind of stocks to buy. If you want to customize your portfolio to your investing style, invest yourself instead
2. You want to beat the market
If you do not want a steady growth, you will have to build and manage a portfolio. Just identify the stocks that will do well in the future. For example, I believe that the technology sector will do well because we are relying more and more on tech, then I could just buy into a tech ETF like XLK or IGM.
Check out my video where I talk about these ETF:
3. You want to save on management fees
Even though Robo Advisors are much cheaper than traditional financial advisors, it is still more expensive than investing yourself. By investing yourself, you will save on the average 0.5% management fee. The fees may seem small at the start, but over time they will add up to quite a lot and eat into your investments
9:16 – Conclusion
There’s no right or wrong in choosing what kind of investment you want to use. If you decide to invest yourself, check out all the other investing videos out there or even my videos:
If you decide to use a Robo Advisor, check out Seedly’s website where they compiled all the reviews for Robo Advisors:
Link do vídeo
Me chamo Felipe Trader e moro aqui em São Paulo. Comecei no forex a 6 anos atrás e hoje vivo somente do meu trading diário. Aqui no blog conto pra você as ferramentas e serviços que uso pra ser lucrativo.
