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With the never ending surge of technology, it is inevitable that investing would become more cost efficient and dynamic in the world of finance. So hence the rise of the Robo Advisors.
I signed up for a Robo Advisor called Betterment about a year and half ago and my portfolio today (July 2017) is up by 24%. Not bad, right? Especially if you compare it to a safe and secure Online Savings account where you should keep your Emergency Fund is returning about 1%.
But let me reiterate, you should definitely have at least an 8 month Emergency Fund before you even start thinking about playing in this arena. But if you’ve already properly funded your EF and you have enough money in your checking/savings account to cover your current month’s expenses, then placing your excess monies in a Robo account is a great idea. In fact I highly recommend it.
A Robo Advisor is an automated portfolio service manager that will invest your money for significantly less than what financial advisers would charge. Basically a robot (or algorithm) can do everything for you in terms of diversifying your money across several low cost ETF’s and Bonds that are invested in the US and abroad. You really get maximum exposure here.
When you sign up for Betterment, you input your age and how long you want to invest. You can even create different goals. For instance, if you are saving for a down payment on a home and you have 5 years to save for it, Betterment will tailor a portfolio for you with the monies you have available to invest in. You can set up a separate goal for retirement and it will auto generate a retirement portfolio with the time horizon you set.
Betterment will make recommendations on how much money you should contribute per month or in one lump sum in order to meet your goals. It’s brilliant. You basically set it and forget it. It re balances your portfolio automatically and reinvests your dividends. It also has a feature called Tax Loss Harvesting where if your portfolio value drops to a certain set threshold %, it will automatically sell out of an ETF and buy into a similar ETF so you can reap in the tax benefits. (They usually toggle between Vanguard and Schwab funds) No muss no fuss.
Fees are relatively low at .025% of your average balance per year. And they just recently got rid of their minimum required amount, so you can start investing with as low $20 bucks. If you sign up using my referral link , you’ll get 3 months free.
For anyone who is new to investing and does not know where to start, or you want to further diversify your investment portfolio, or you are just lazy like me, then I completely recommend trying your hand at Robo investing. So far I have been very pleased with this service. Who would complain if they got a 24% return on their money?
If you decide to invest with a Robo Advisor service, I recommend setting up an automatic deposit at least once a month so you can dollar cost average instead of placing one big lump sum at a given time. There are several Robo Advisor services available but I can only speak for Betterment as it’s the only one I’ve used. Many of the larger players on Wall Street are jumping on the Robo Advisor bandwagon. They recognize clients want the best possible returns while paying the lowest fees.
Here are a few helpful reviews that I found on the topic of Robo Advisors so you can further decide if it’s for you:
Mr Money Moustache Review
What is the best Robo Advisor?
I would love to hear your thoughts and experiences with Robo Investing, so please share.
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