The Craze Sweeping the Nation – Robo Investing

Recently all we hear about is “Robo Investing”. The themes vary between companies and sites offering the service, but in essence most sites – including the big banks – ask you to fill in the standard type forms that you would at any brokerage to open an account, then put your money in the account, and then let the automated service pick the stocks which your money is going to buy.

Of course the so-called automated service ranges from some portfolio manager in the background picking stocks (just like your current advisor), or some variation of computer assisted stock picking.

If you believe that some faceless, nameless automation can do better than your current advisor, perhaps you should try this service. After all, we should trust nameless, faceless people with our money, shouldn’t we?

Why is Robo Investing Becoming Popular

There is a change sweeping the markets. Historically when you pick an advisor, he/she talks the talk, and is trained to give you confidence. After you are convinced and give your money to this individual, in many cases, this trusted advisor then simply gives your money to whichever seemingly good mutual fund he/she likes. Too often what determines which mutual fund the advisor picks, will depend on how much of a Rider the mutual fund will pay that advisor every month.

Nice job if you can get it.

Once a month the mutual fund sends the advisor a report (along with a check for the referral) and the advisor fancies up the report with in-house automated software and sends it off to you. So usually that check is between 1% and 1/2% of the current value of the investment.

What you are not told, is that the mutual fund pays out a lot of expenses from the money that you give them. They have audit fees, legal fees, mailing fees, lots of administrator fees, stock picker fees, bus boy fees, and other fees, and of course they have the expense of sending that check every month to the advisor.

But the Financial World is Changing

Under new rules coming into effect, your advisor is being forced to reveal to you just how much of your money is being taken from you by all of these parties with their hands in the trough. People in the industry are fearing this coming change and are trying their darnest to find other ways to make money, because the fear is that many investors will realize just how much they are paying, and they will desert their advisors in droves.

Are Robo Investment Sites Good for YOU?

That you will have to decide yourself.

We believe that Market Timing is extremely important. Will the Robo site takes this into consideration. Will the Robo site leave your money in cash when the markets look strained.

Will the Robo sites look to have your money invested, because leaving money in cash usually is not the most profitable for the advisor.

We believe that the general indexes may be fine, but they rise and fall. Over the long term of decades, many studies have shown indexes to be a valid investment. If you believe in that, perhaps ETF’s which completely track the market are for you. Their management fees are quite modest.

We believe that choosing specific stocks is the way to go, and we believe that buying and selling at peaks and valleys in the market is important. Does the Robo site do this? Does the Robo site do this any better than your advisor?