Robo-advisors are sufficient for investors who want a hands-off investing experience. However, certain investors should not sign up for robo-investing services if they want the best results from their investment portfolios. Here, experienced investor Daniel Calugar discusses three types of investors who require human rather than algorithm-based advisors to best help them with their financial planning and investments.
Robo-advisors are designed to do the heavy lifting by creating and managing your investment portfolio for you. This tool frees time to focus on earning and contributing and living your life. There are humans involved in choosing the underlying funds, creating the portfolios, and programming all the choices made during account creation; still, algorithms streamline the ongoing portfolio management.
While robo-advisors make it easy to set up an account and make contributions, there are still decisions to be made. As a new user, you will need to answer a series of questions about your goals and risk tolerance. These may be questions to which you are not sure how to respond. For an inexperienced investor, a financial advisor may be a better option.
For investors that have been around the block, it may be more profitable to use your past experience. While it is never too late to learn new investment strategies, a seasoned investor may not want to forgo their proven methods to try something new.
If you like being in control, think twice before using a robo-advisor. Some people are just not comfortable with turning the reins over to someone else, even if the latest technology backs that person. If you like to roll up your sleeves and make your own investment decisions, do it. Make sure you’re prepared and don’t get in over your head, though. You may find a relationship with a financial advisor that gives advice when needed but lets you make your own decisions more palatable.
Overall, robo-advisors are a creative and useful option. They can make life easier for many investors, especially those with enough experience to define their goals and know their risk tolerance. During those years where an investor is mainly focused on earning and contributing while juggling a busy life, these new tools can save the day.
Calugar utilized his technical skill set to design computer programs that would help him make more effective investment decisions. When Dan is not working, he enjoys spending time working out and being with friends and family. As a pilot with over 2000 hours of single-pilot experience flying business jets, he enjoys flying volunteer flights for Angel Flight.