Automated managers or ‘robo advisor’ are a very useful tool for all those who want to start investing. In addition to providing low-cost advice, they facilitate that investment is made in a diversified way.
Technology can be a very useful tool if you want to start investing with little money and have low-cost advice. The development of automated managers or robo advisors makes it possible to invest in a diversified way in mutual funds of global managers and with low commissions. From the financial comparator HelpMyCash.com they explain the main characteristics of this service.
A robo advisor offers two types of portfolios: mutual funds or pension plans. Portfolio fees, compared to fees charged by traditional banks for investing, can be up to two percentage points less. The explanation is given by the type of investment product that makes up the portfolio and the use of technology.
The products that make up the portfolio will be, for the most part, index funds, so management is passive (less management activity) and it is possible to have lower prices. Technology, meanwhile, helps automate various processes before and during the investment and that is why commissions can be reduced even more.
The total commissions that are paid when investing with any of the four robo advisors independents that exist in Spain right now are below 1% per year for mutual fund portfolios.
And how does this affect profitability? It is a direct relationship. The profitability may be higher the lower the commissions. Before starting to invest, one must be aware that there is always a risk of loss of money, but the lower the annual cost, the more profit the investor will have.
What kind of advice do you offer?
The advice offered by the robot advisors without being comparable to advise from a human expert, it can help those starting out in the world of investing in various ways. First, because without having enormous knowledge Of the investment products, a diversified investment portfolio can be formed avoiding choosing, one by one, the investment funds among the hundreds that there are. How is it possible? After conducting a suitability test.
The suitability test consists of about ten questions that are answered before investing and that allow the robot advisor to know what the client’s investment knowledge is and what risk he wants to take, as well as what his financial situation is. Robo advisors have several pre-configured portfolios and, depending on the test results, they will recommend one or the other to the investor. Once the test has been answered, it is possible to contract an investment portfolio with funds that replicate indices from various parts of the world and in various currencies, thereby further diversifying the risk on the money invested.
All this process and service is done online, either through the robo advisors’ website or through mobile or tablet applications.