Robo-advisor is a computerized program that implements financial advice. Most importantly, the app handles your finances through an automatic algorithm rather than having a person control your portfolio. This app is limited to investment trading, monitoring, and trade execution (since the other financial planning elements are incredibly personal and cannot be programmed with any algorithm). Therefore, read the following critical points on Robo advisor that you need to know.
Benefits
It is more like any other type of mechanization. Since a man or woman does not have the daily task of managing a portfolio, the cost is likely to be cheaper while a machine does. The number of wallets can be easily “scaled up,” so a program could handle an indefinite number of wallets, both in terms of memory and speed of trade execution.
Also, the implementation of trades is instantaneous because the machine does not think and can execute instructions at the electricity rate when the instructions are obvious. Another well-known characteristic is that machines are emotionless. When a trading instruction is given, it is executed regardless of market behavior. Someone may have uncertainties, doubts, hesitations, or change their ideas, which may be worse or better than your circumstances.
Drawbacks
You would like to obtain a service that meets your exact investment needs. In case you want a particular mix of assets to feel comfortable according to your preferences, then the algorithm must be elastic enough to allow for a wide selection of strength mixes.
Otherwise, you may end up with an allocation that is not right for you, which can lead to further dangers. Market execution is not perfect under extreme conditions: the algorithm doesn’t necessarily work. Depending on how you command the algorithm, it may not be followed and have undesirable results. If you tell the device to sell at any price, it may discover the worst price because the cost will be full-on extreme price changes.
Robo-Advisor Users
Robo-advisors perfect use is to get an outspoken circumstance with minimal trading, reasonably common and relatively straightforward investment objectives, and simple rebalancing. This system is usually applied by registered investment advisors, financial planners, retirees, millennials, and high net-worth people.
Suppose you rebalance your portfolio with a predetermined percentage in each investment product, the result will be useful, though not perfect, which could be automated. If your portfolio contains liquid securities and typically traded funds, automation is much more comfortable. A small portfolio that is not complicated is also the best for automation.