Do you invest via multiple robo-advisors or do you just stick with one? If you are the former, how and why do you diversify across the multiple robos? (2024)

FAQs

Do you invest via multiple robo-advisors or do you just stick with one? If you are the former, how and why do you diversify across the multiple robos? ›

Some would diversify across multiple platforms to minimise platform-specific risk. It's a good consideration but if you understand how the platform handles your money and can sleep at night knowing that your funds are safe, there's no need to diversify across platforms just for the sake of it.

The generic cons of Robo Advisors are that they don't offer many options for investor flexibility. They tend to not follow traditional advisory services, since there is a lack of human interaction.

Robo-advisors can be worth it for set-it-and-forget it investors who want automated, diversified portfolios. These low-cost, low-minimum platforms are ideal for novice investors seeking competent portfolio management.

Robo-advisors provide financial planning services through automated algorithms with no human intervention. They start by gathering information from a client through an online survey and then automatically invest for the client based on that data. Robo-advisors often use passive index investing strategies.

Some would diversify across multiple platforms to minimise platform-specific risk. It's a good consideration but if you understand how the platform handles your money and can sleep at night knowing that your funds are safe, there's no need to diversify across platforms just for the sake of it.

Limited Flexibility. If you want to sell call options on an existing portfolio or buy individual stocks, most robo-advisors won't be able to help you. There are sound investment strategies that go beyond an investing algorithm.

The problem is that most robo-advisors do not offer comprehensive exposure to these assets. This means that investors must either open separate accounts elsewhere in order to gain exposure to these asset classes, or else capitulate to accepting a portfolio consisting only of stocks and bonds.

Nearly 7 in 10 Millennial millionaires have some money in robos or automated portfolios. Moreover, nearly 20% of Millennial and Gen Z households who know the investment products they own have some money in robos versus only 13% of Gen X and only 2% of Boomer+ households (Boomers and older).

Doing it yourself can give you more control, flexibility, and customization over your investments, but it also requires more research, monitoring, and discipline. You should consider your goals, risk tolerance, and investment style before choosing between a robo-advisor or doing it yourself through an online broker.

Do robo-advisors outperform the S&P 500? ›

Do robo-advisors outperform the S&P 500? Robo-advisors can outperform the S&P 500 or they can underperform it. It depends on the timing and what they have you invested in. Many robo-advisors will put a percentage of your portfolio in an index fund or a variety of funds intended to track the S&P 500.

Robo-advisor performance is one way to understand the value of digital advice. Learn how fees, enhanced features, and investment options can also be key considerations. Five-year returns from most robo-advisors range from 2%–5% per year.

Do Human Financial Advisors Outperform Robo-Advisors? Not necessarily. Their performance, like that of robo-advisors, depends on a variety of factors, including market trends and the individual's financial situation and goals.

For core investing and planning advice, a robo-advisor is a great solution because it automates much of the work that a human advisor does. And it charges less for doing so – potential savings for you. Plus, the ease of starting and managing the account can't be overstated.

Drawbacks of Robo-Advisors

Some robo-advisors only offer human support for tech- and account-related questions, which means there's no one to answer questions about your investments. Others have a hybrid model which may give you access to human advisors.

financial advisor, there is no one right choice for everyone. The best fit depends on several factors: Your level of investing experience. If you're a novice investor or prefer to be more hands-off, a robo-advisor is likely a good fit.

The benefits of becoming an advisor include unlimited earning potential, a flexible work schedule, and the ability to tailor one's practice. The drawbacks include high stress, the hard work needed to build a client base, and the ongoing need to meet regulatory requirements.

Robo-advisors can be a great solution for many investors. They offer investment management at a reasonable cost, letting you focus on doing more of the things you love instead. A robo-advisor sets up an investing plan and manages it, and all you need to do is add money to the account.

Final answer: Robo-advisors have two advantages over their human counterparts: they provide personalized financial advice based on individual goals and circ*mstances, and they offer lower fees compared to human financial advisors. So the correct answer is Option A and C.