Investment Portfolio Automation Advantages and Disadvantages
Investment portfolio automation is becoming increasingly popular with investors of all ages. As more people take advantage of the latest financial technology, they find that they can invest quickly and easily by using robo-advisors rather than traditional investment services.
Is a robo-advisor right for you and your money, however? Decide for yourself by learning more about the advantages and disadvantages of investment portfolio automation.
Robo-Advisor Advantages
Low Costs
Investment portfolio automation offers several unique advantages that you cannot find with traditional investment services. One of the most appealing aspects of using a robo-advisor centers on its low cost.
You can secure automated investment services for as low as 0.25 percent and sometimes at no cost at all depending on the robo-advisor that you choose. The minimal cost appeals to people who want to avoid the higher expenses found with using a brokerage firm or hiring a financial adviser.
Expanded Opportunity
Robo-advisors allow more people to invest and grow wealth because of their low cost services. People who may have shunned investing find that they can put their money in the stock market without sacrificing their financial livelihoods or paying for financial services that they do not need.
As such, this technology has brought in younger investors to the market as well as people with more limited financial means. They now enjoy a better opportunity to invest and grow their money for the future.
Fast and Simple
Finally, investment portfolio automation is simple and fast to use. People can invest and manage their money with a few clicks of their computer mouse or taps on their smartphone or tablet screens. They do not have to schedule a meeting with their financial adviser or take time out of their day to handle their investments.
Robo-Advisor Disadvantages
No Personalization
However, this automation comes with a few notable downsides, primarily the lack of personalized service. Robo-advisors offer a one-size-fits-all approach to investing, which may or may not be ideal for your money.
It does not give the chance to meet in person and build a relationship with a financial adviser like James Dondero who can take your unique financial situation into account when investing your money. Robo-advisors follow cookie cutter algorithms that leave little room for customizing your portfolio.
No Other Financial Services
Investment portfolio automation also does not come with other financial services that you might need to maintain or improve your present or future financial situation. Robo-advisors are of no use when it comes to advising or assisting with:
• tax planning
• budgeting
• personal savings
• borrowing or credit
You can secure those financial services when you work with a financial adviser or capital management professional like James Dondero, however. If growing your wealth includes using these other services, you may not be satisfied by relying on a robo-advisor.
About the writer: James Dondero is a graduate of the University of Virginia and its McIntire School of Commerce. With dual degrees in accounting and finance, he is certified as both a Certified Management Accountant and a Chartered Financial Analyst.
His professional career includes working for financial powerhouses American Express and Protected Life. He is the co-founder and president of the largest manager of collaterized loan obligations in the country, Highland Capital Management, L.P., which is headquartered in Dallas, Texas.
