Technology is changing the way investment guidance is delivered these days. Robo advisors are changing the concept of the conventional financial advisor by leveraging algorithm-based tactics for portfolio structure – whether it is for stocks, mutual funds, or exchange-traded funds.

Robo advisors can automatically choose investments and design a diversified portfolio for investors. Once investing the funds, on an ongoing basis, they automatically alter the investments to align your portfolio back to a target allocation. Even some Robo advisors make trades automatically that reduce investor's tax bill—a process known as tax-loss harvesting.
Robo-advisors gain popularity as people are now looking for low-cost, automated investment opportunities. “Technology, cost, and convenience are the most eye-catching features for the younger generation moving toward Robo advisors,” says Tamir Zoltovski, cofounder of Moneta International UAB.

How Robo-Advisors Work?

A Robo-advisor is an investment platform or software that uses technology to help people in investing their money. After filling out personal information, investment goals and risk tolerance, the software generally creates an investor’s portfolio and manages it with algorithms. The software will even rebalance an investor's portfolio and use tax harvesting to lower their tax liabilities.

Investments Used by Robo Advisors

They often use mutual funds and exchange-traded funds to construct the portfolio and not individual stocks. Robo advisors often follow an index fund or a passive investment approach depending on new portfolio theory research. It is important for allocating stocks or bonds. Then investors pick the suitable fundamental stock asset classes, such as large-cap, small-cap, or international and then focus on fundamental bond asset classes, such as short, intermediate, or long-term. The Robo advisor does all this for you.

Why Use a Robo-Advisor?

Low fees and no interest conflicts:

Many Robo-advisors charges considerably lower fees compared to conventional financial advisors. Moreover, it's an automated service, so there is no interest conflict, unlike an individual financial advisor who may be under pressure to sell a particular set of products.

Availability:

Unlike most groups, Robo-advisors are always available for you when you need them. All you need is an internet connection and you will have their help 24/7.

Conclusion:

The Robo-advisory field is into its early days of emergence. The new applicants into the landscape are benefitted by lower fees while these robo-advisors contribute in many ways for professional asset management. Being an investor, you should determine what type of investment assistance you need and choose a Robo-advisor that suits your style.

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