9 Things to Know About Robo Advisors

Robo-advisors have become a popular option for American investors who prefer an actively managed account without the expensive fees associated with hiring a human manager. Robo-advisors are digital account management services that utilize trading algorithms rather than human input to actively buy and sell stocks and other assets. For investors lacking an advanced understanding of how the market works, robo-advisors make normally difficult investing decisions automatically based on changes in market conditions. The software also provides helpful account maintenance procedures such as automatically reinvesting dividends and re-balancing portfolios. Here are nine things investors should know about robo-advisors.

  1. Robo-advisors are Cheap

Robo-advisor services are much lower-cost than their human counterparts. For example, leading robo-advisor service Wealthfront offers its services free of charge for clients’ first $10,000 in assets and then charges only 0.25 percent in fees above that threshold. By comparison, traditional advisory services from Buckingham Asset Management cost clients up to 1.25 percent in fees annually. Robo-advising services are certainly low-cost, but investors need to understand there may not be a human being monitoring and protecting their portfolio. In addition, while algorithms sound impressive, they are only as good as the experts that design them.

  1. Robo-advisors Can Help Minimize Tax Losses

Taxes can take…

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