Robo Advisor Performance. Elements, How to Choose an Advisor, and Benefits

In case you are trying to find a Robo advisor that is going to be able to help your retirement plan, then you need to know what the different types of advisors can do. There are two main categories: human and robotic. The first one includes financial planners who have been trained to provide their clients with advice on how they should invest their money. They will also make sure that all the information provided by them is accurate so as not to mislead anyone.

On the other hand, there are automated investment platforms that use algorithms to determine when an investor needs some sort of assistance or guidance. These robots don't need any training since they already understand everything about investing. However, if you want to get more details regarding these services, we suggest checking out our article here.


The best way to choose between both options is through research. You must look at each type of service from every angle possible before making up your mind. For example, if you decide to go with a robot, you might want to consider whether this platform has enough experience to handle certain situations. If you think that you may require additional support, then you could opt for a human adviser instead. In addition, you should check out the fees associated with each option. It would be wise to avoid paying too much because you won't end up saving anything.

Elements when choosing A Robo-Advisor

When looking into the various features offered by a particular Robo advisor, you should take note of several things.

You should pay attention to the minimum deposit amount required.

 Paying attention to this aspect is very crucial because many people tend to overlook it. This means that you will only be allowed to start using the platform once you have deposited $5,000. Therefore, you shouldn’t worry about having less than that amount available.

Make sure that the platform offers multiple accounts.

This feature allows investors to open separate accounts where they can keep track of their investments separately. As such, you will no longer have to deal with managing multiple portfolios. Instead, you will just focus on one account while still being able to access all the necessary data.

Look at the number of assets covered.

This refers to the total value of stocks, bonds, mutual funds, ETFs, etc. that the platform covers. Some companies offer coverage for hundreds of thousands of dollars whereas others cover only a few hundred thousand.

Check out the fee structure.

 It's always good to see how much the company charges its customers per year. Most firms charge anywhere from 0% to 1%. However, those who charge higher rates usually come with better customer care.

How To Choose An Advisor?

Choosing a Robo advisor isn't easy but it doesn't mean that you cannot succeed. Here are some tips that you can follow to ensure that you pick the right firm.

Start off by reading reviews online.

By doing this, you will learn more about the quality of the product. Moreover, you will also discover whether or not the company provides excellent customer support.

Next, try contacting the firm directly via phone call. Ask questions like “What kind of returns does my portfolio generate? How often will I receive updates? What happens if something goes wrong?”

Finally, ask friends and family members for recommendations. They know what works well so make use of their advice.

How Does a Robo-Advisor Work?

A Robo advisor operates as an automated investment manager. The process involves setting up an account and investing money within it. Once everything is set up, the system automatically makes decisions based on specific criteria. These include asset allocation, risk tolerance levels, time horizon, etc.

In other words, when you sign up for a Robo advisor, you don't need to do any work whatsoever. All you need to do is sit back and relax while the software takes over.

 It will then manage your finances according to certain rules which were previously defined.

The best part about these systems is that they allow users to invest without worrying about market fluctuations. In fact, most platforms provide real-time quotes so that you won’t miss anything important.

Benefits of a Robo-Advisor


There are several benefits associated with using a Robo advisor. Below we list them:

You get to save time.

When you decide to go through the hassle of manually selecting stocks, researching new products, analyzing financial statements, etc., you end up spending hours every week. With a Robo advisor, however, you simply log into your account and let the program take care of things.

You get to enjoy peace of mind.

If you're worried about losing your hard-earned cash because of poor stock selection, bad timing, etc., you should consider going with a Robo advisor. After all, there's nothing worse than waking up one day and realizing that you've lost millions due to poor decision-making.

With a Robo advisor, though, you'll never experience this problem since the system has been programmed to handle all aspects of your investment strategy.

You get to benefit from low fees.

Robo advisors typically charge lower fees compared to human advisers. For example, Wealthfront offers a flat fee of $0.30 per trade whereas Fidelity Investments charges around 2% annually.

You get access to expert research tools.

Most Robo advisors offer free research reports along with educational materials such as videos, articles, newsletters, etc. This way, you have no excuse for missing out on valuable information.

You get to avoid costly mistakes.

As mentioned earlier, humans aren't perfect. As a result, they tend to make costly errors at times. However, Robo advisors operate under strict guidelines, and therefore, they rarely commit mistakes.

You can easily switch between different strategies.

You may want to change your investment plan in the future but find it difficult to do so. If you choose to stick with a particular adviser, you might be stuck with his or her methods forever. On the contrary, with a Robo advisor, switching strategies is easy. Simply create another profile and start working again!

You get to diversify across multiple markets.

One thing that many people overlook when choosing investments is diversification. By investing in various asset classes, you increase your chances of achieving long-term success. A good rule of thumb is to allocate 10%-20% of your portfolio towards each class.

You get to automate your trading process.

Many investors prefer to use manual processes when managing their portfolios. While this approach works well if you only own a few assets, it becomes problematic once you add more securities to your portfolio.

Is There Any Risk Involved With Using A Robo-Advisor?

Yes! You should never forget that there is always a chance of losing money. That said, the chances of making profits are high since the algorithms used by these programs are designed to maximize gains.

However, even though the odds may seem favorable, you must remember that nothing comes free. If you want to enjoy consistent results, you'll need to put in the effort. For example, you might need to monitor your portfolio regularly. Also, you should avoid letting emotions get involved.

This means avoiding emotional trading such as buying low and selling high.

Conclusion: Is A Robo-Advisor Right For Me?

If you're looking for a way to automate your investments, then a Robo advisor could be perfect for you. After all, it allows you to focus on other things instead of having to worry about managing your financial affairs.

Moreover, many people find them convenient because they have no idea where to start. As long as you understand the risks associated with using one, you shouldn't have any problems at all.

Robo advisors aren't just limited to stocks. Some offer services related to bonds, mutual funds, ETFs, cryptocurrencies, etc. So, if you're interested in automating your entire portfolio, then check out our list of top 10 Robo advisors today.