Keeping in mind the current financial market, the robo advisor is booming as there are millions of dollars that are being invested in such programs. As per prediction by the experts, the total amount of assets that will be handled by robo advisors by the end of 2020 would be $490 billion. Don’t you think that’s a lot to handle? People are these days welcoming new technology with open arms, whether a remote controlled operated car or an iPhone or a new microwave. Henceforth, this explains their positive attitude towards robo advisors as well.
In case you still don’t know what a robo advisor is, it is a new kind of online software which has been designed to manage investments of individuals. It is one of the most appropriate solutions for someone who is not eager to hire a financial advisor or for someone who doesn’t have enough assets to be hired by a financial advisor. But how are you supposed to know that you’re ready to seek help of a robo advisor? Here are few signs that you can commit to a robo advisor.
- When you have completed your financial plan. If you see that your financial plan is showing you a clear path for moving forward with your financial future and has allowed you to deal with savings goals, asset allocation and asset targets, this is when you may commit your finances to a robo advisory software.
- When you’re someone who is retired and you have also got an income distribution policy. If the plan has been designed in such a manner that you are sure about how much you can obtain from your accounts, you can commit to a robo advisor.
- When you have completed your estate plan. The trust or family will is updated and each and every child is listed by their name. This plan must have identified the healthcare directives and recognized your commitment to your life wishes. If your family too is aware of all the estate planning documents, you may seek help of a robo advisor.
- When your cash management is secure enough and when you have more than 6 months of household expenses in your bank account. This is another time when you can seek help of a robo advisor.
Which types of investments are used?
When it comes to robo advisors, they mostly use exchange-traded funds or mutual funds in order to build the investment portfolio and not the individual stocks. They generally follow a passive approach towards investment based on the theory of modern research. The most important factor is to allocate the bonds and stocks in a proper manner. Next you need to focus on which stock asset classes to work, like large cap or small cap.
So, if you’re someone who falls in any of the above mentioned financial categories, you can seek help of a robo advisor to take care of your finances and investments. However, before you invest in such robo advisors, assess your finances in a watchful manner.