Whether you're new to investing or have a strong portfolio you've managed for decades, robo investing is the new, safe way people can invest their money. A robo advisor is a wealth management company that is run online without actual human advisors doing any of the planning. Since robo advisors lack the human touch, services are limited strictly to portfolio management. If you need your taxes done or have questions regarding your personal financial plan, you'll need to speak with an actual financial advisor, too.
5 Ways to Choose the Best Robo Investing Platform
If you're hoping to give robo investing a try, it can be tough to decide which platform is the best for you. Here are five robo advisor comparison tips to help you choose the best online robo investing platform.
Look for a good business plan. There are dozens of robo investing platforms out there today, but only some stand the chance at being around for the long-term. Personal Capital, Betterment, Wealthfront, and LearnVest, for example, all have sound business plans in place. They've all grown substantially over the past few years, they know how they're going to make money, and they put out products that the public wants.
Look for low management fees. Robo advising has quickly gained traction due to the extremely low management fees charged by the various companies. Most companies will charge you a percentage of your assets. Usually, the more assets you have, the less percentage you're charged.
Don't forget about expense ratios. Management fees are just one part of the equation. Robo investment firms also charge an expense ratio, so make sure to take a look at all of the fees involved before decided which company will be best at meeting your needs and keeping your expenses low.
What is the minimum you can contribute? Different companies have varying account minimum requirements. Personal Capital, for example, has a minimum balance requirement of $100,000. If you're just starting out, you might have to select a company that has a minimum balance of $10,000 or even $0.
How much human interaction do you want? Typically, the more expensive the company, the more human interaction you'll receive. Personal Capital, for example, is one of the most expensive online wealth management platforms. But, you get what you pay for. Personal Capital gives investors a mix of advanced technology and real human assistance. To some, that's a price worth paying for.
Is Online Investing for You?
While there's no definite answer, robo investing is worth a shot. Costs are low, the systems are efficient and it can be a great way for new investors to get their feet wet without having to pay high rates generally associated with financial advisors. If your financial portfolio is extremely diverse and complicated, though, it could very well be in your best interest to sit down with an expert to determine what's best for you. And, robo investors don't seem to be going anywhere soon, so now could be a great time to give it a shot. According to research by A.T. Kearney, robo advisors will manage $2 trillion in assets by the year 2020. By following the tips above, you should be able to choose the best robo advisor platform for your individual financial situation.