How Robo-Advisors are Changing the Investment Industry

Original article was published on Artificial Intelligence on Medium

Investing has become an essential part of our lives. More and more people are thinking about their financial future, and investing in it sounds like a mature idea. The only thing that’s left is opting in for the right platform, which will allow maximizing gains while minimizing costs.

The modern investment world offers many new services, not to mention every financial institution has products of its own. But which one is the right one? Should you select a start-up instead of signing up for a traditional bank-supplied mutual fund?

Platforms that Revolutionized the Investment Game

There are no bank appointments, live meetings with financial advisors, sales pitches, commissions paid to bank representatives, hidden fees or loads of paperwork. Robo-advising technology allows you to automate investments. It uses the Modern Portfolio Theory, which dictates the strategy of investment diversification. It enables you to maximize your returns by minimizing risks. In addition to that, certain platforms implemented an automatic rebalancing feature, which will adjust your portfolio to ensure the minimum loss if the market is acting up.

The robo-advisors allow you to open an account while at home in your pyjamas. You can oversee the investment automation progress at any point during the day.

No More Fees or They are Very Minimal

According to Investopedia, “the average expense ratio for actively managed mutual funds is between 0.5% and 1.0%. They rarely exceed 2.5%”. Many people would still consider this an unnecessary expenses.

When you choose an investment portfolio, you are always hit with fees. Robo-advisors completely changed that by offering lower costs: many have a 0.25% fee, while some even offer a 0% fee. Several platforms have yearly fees, but most of them are known for having none: no hidden fees, no hidden costs.

Comparison of the Robo-Advisors

Nerdwallet recently published a comparison of best 12 robo-advising platforms, highlighting the management fees, minimum investments and other details. Take a look at the table below to see the rating: