Many investors usually find retirement portfolio is overwhelming. Thanks to the growth of the mutual fund industry and exchange-traded funds, now we have automated financial advisors. It is a robo-advisor.
Robo-advisors defines as automated investment platforms that use algorithms in order to match investment with their tolerable risks and timeline. It was firstly launched in 2008 and started to get broader consumers in 2010.
Most of the robo-advisors use exchange-traded funds (ETFs) as their main investment type. Besides, they usually also provide a mix of asset classes, like stocks and bonds. Other than those, Robo-advisors also provide real-estate, commodities, and natural resources as an investment asset.
Despite the fact that this platform is still new, it is growing rapidly. Many suggest that retirement investment through Robo-advisors can be beneficial.
The Pros of Retirement Investment through Robo-Advisors
Simple Approach
The easy access provided by Robo-advisors serves as its main benefit. You can access your account every day at every time, including your account performance update.
Besides, some Robo-advisors do not have any minimum balance requirement if you want to open an account.
Instant Diversification
The most significant benefit from Robo-advisors is they let you diversify your investment instantly. This platform focusses on your overall capital to the different major asset classes, including real estate, bonds, and stocks.
Tax-Loss Harvesting
Similar to most of the automated investment platforms, Robo-advisor also allows its users to tax-loss harvesting. That is a process to offset capital gains through the sale of other assets to generate a loss.
The Cons of Retirement Investment through Robo-Advisors
Lack of Personal Guidance
Most of the Robo-advisor provider offers access to certified financial planners professionals. Usually, clients can access that through phone, email, video chat, or other. Yet, if the clients have low financial knowledge, it will bring difficulties for the client to generate his financial goals.
Does not Erase Irrational Decision Making
As mentioned before, automated artificial intelligence can not replace financial planning guidance. Thus, there is still the possibility of making inconsistent rational financial decisions.
