Pros and cons of robo-advisers

Robo-advisers are financial software programs that automate the investing process. They use complex computerized algorithms to buy and sell investments based on the information you provide. Here are some of the pros and cons.

ADVANTAGES

Here are a few advantages of robo-advisers:

• They’re affordable. Human advisers typically take one to two per cent of your portfolio’s value as a fee. Robo-advisers, on the other hand, charge a fraction of that. This is ideal for individuals and small businesses with tight budgets. When you pay less in fees, you also have more money to invest.

• They’re accessible. Many human advisers only accept clients with a certain net worth. Conversely, most robo-advisers don’t require a minimum investment. This allows anyone to reap the benefits of investing without pre-existing wealth.

• They’re easy to use. Most robo-advisers have simple interfaces that allow you to view your investments and add funds from anywhere in the world.

DISADVANTAGES

Here are why robo-advisers may fall short for some investors:

• They’re limited. Robo-advisers can’t grasp your entire financial situation. This makes them unsuitable in circumstances that entail a high amount of risk.

• They’re generic. Most roboadvisers invest in exchangetraded funds (ETFs), which is great for diversification. However, they may not be a good fit if you want to dabble in different kinds of securities.

Additionally, robo-advisers can’t give personalized advice. Therefore, they aren’t a good option for people looking for step-by-step guidance and counselling.

Finally, it’s important to consider your investment strategy, risk tolerance, retirement plan and assets before deciding if a robo-adviser is right for you.