Which is better? To go it alone or to pick a robo advisor? All the sage financial advice says investing for the long term is the smarter choice. Rather than dipping your toes in and out of the market, it is best to simply hang in there for the long haul. But do you know why?
When you crunch the numbers what you find is an astonishing difference in wealth between buy-and-hold investors and buy-and-sell investors. In fact, one study showed that a buy-and-hold investor can make 6 times more over a sixty year period than an investor who locks in gains by selling each year, even if both portfolios grow at the same rate.
That is not to say that trading does not have its merits. When you factor in fees paid to a traditional financial advisor charging as much as 2% annually when all is said and done with management fees and expense ratios, you might well be better off opening an account at a reputable broker, such as thinkorswim, and taking control of your own financial future. Top trading platforms and brokers even allow you to protect your portfolio with protective put options and enter covered calls to generate income too.
However, if you don’t have the time or inclination to go solo and also don’t want to be charged the high fees typical of traditional advisors, a robo advisor is an excellent choice. For example, Betterment, a leading robo advisor and one of the first has highly competitive fees, and ton of value-added services, such as retirement calculators, tax loss harvesting services and much more.
If you have not used a robo advisor before, some of the best have great mobile experiences too, like Personal Capital, where you can track net worth, expense and manage your personal budget. For an all-round experience, Betterment has earned one of the best reputations in the robo advisor industry. They are tax conscious and pay attention to fees, which is exactly the way it should be. You want your financial advisor to look out for your future wealth, not their own. And a sad fact of traditional financial advisors is that they simply don’t have the technology resources or often capability to scale like the major robo advisors do.
The bottom line is robo advisors offer a ton of value to the hands-off investor who wants to keep fees low and is committed to long term investing to build a healthy retirement portfolio.