How to Make Money by Investing with a Robo-Advisor
Choose the right Robo-Advisor for your needs
For those unfamiliar with what a robo-advisor is, it is an online investment service that selects a suitable portfolio and manages it depending on the investor's risk. However, there are many different types of robo-advisors available each applying their own investment method. It's important to understand the differences as most will seem very similar. In the main, some of the differences are:
- The cost of an automated investment management (ranging from as little as 0.5%)
- Investment differences, some are solely Exchange Traded Funds (ETF's) selected by the robo-advisors while others have alternative investment methods
- Money transfers, some require transfer of money to themselves where they hold it as custodian whereas others allow you to keep your money at reliable brokerages
When choosing your robo-advisor, consider their licence, their team's credentials and make sure to question their experience and qualifications.
System Registration and Risk Tolerance Testing
When you decide to use a robo-advisor you access the online platform to register. Take a good look around the platform and read everything carefully so you feel confident that it is the right service for you. Once you have made the decision to proceed you will then be asked to take a short risk tolerance test. This is done to assess your attitude toward risk and offer you a suitable investment portfolio. It takes a very short amount of time and the results are bespoke to each investor.
Reading your Sample Portfolio
Once you have completed the registration and tolerance test, you will receive a summary of the type of portfolio you could invest in. It will show a breakdown of how much is suggested to be invested in each asset. This is normally expressed as a percentage of total assets. It also presents a risk tolerance score. Read this thoroughly because it will show where your money might be going if you choose to go ahead. Information will include which countries you will invest in, the industries and the type of investment products too.
Making an Investment
Finally, once you have decided to continue you will then place your investment money into a broker's account. Don't forget that you will be responsible for paying for the execution of investment operations, any investment advice and for buying or selling investment products. At this point it is important to select a reliable advisor.
It is worth mentioning that investment portfolios can fluctuate in value but the main thing is to stay calm because this is entirely normal. You should expect to see a return on your investment over time.