You can’t hear me shouting, but I am passionate about telling you why robo-advisors are an amazing tool for wealth-building and why I invested in one. Here’s my story and how it might help you become financially successful, too.
Why I Invested in WiseBanyan
I invested in WiseBanyan because I had to, but I’m really glad I did. WiseBanyan is one of many robo-advisors that manage your investments in a time-tested way to grow your money for the long term. I had to invest in WiseBanyan to participate in their affiliate program (where I get a small fee if someone signs up for the digital advisor from a link on one of my websites). But, with a required minimum investment amount of $1, zero management fee and a sound investment strategy, it wasn’t a huge ask.
That said, I don’t promote investments that I don’t support. My January 2017 investment of $1,000 on the WiseBanyan robo-advisor is now worth approximately $1,200, which makes for a respectable 19-month return of 20 percent.
But, you know the drill — past returns aren’t a guarantee of future performance. Also, I don’t recommend choosing a robo-advisor based solely upon returns. When investing, you’ll have a greater chance of good long-term returns by following time-tested investment strategies. And, many robo-advisors use these same successful investment approaches.
Let me walk you through the “best practices” of investing and show you how robo-advisors use these strategies.
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What Is the Best Way to Invest?
I’ve been investing for decades. Initially, I was a stock picker, looking for the next Intel, Alphabet (Google), Amazon or Netflix. Due to a combination of research, patience and luck, I did quite well and considered myself a savvy investor. Then, during my MBA studies, after years of investing, I learned that the odds of stock pickers and active management beating the passively managed index funds were slim. In fact, a 2017 research report from Standard and Poor’s joined the countless other studies and found that during the last 15 years, the vast majority of actively managed mutual funds failed to beat unmanaged index funds.
Fees are a big part of the success of index funds as you can own a share of an entire stock market index for 0.05 percent of your investment. Whereas, actively managed funds typically charge a one percent (or greater) management fee.
If you want to invest successfully in index funds, the most promising strategy, you have several choices. You can DIY by buying index funds, as my friend suggested. Or, you can get some guidance with a robo-advisor.
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Why Robo-Advisors Are a Great Way to Invest
If you’re busy and want to build wealth with investing, then the robo-advisor investment manager is a logical solution. I even have my daughter invested in the Schwab Essential Portfolios robo-advisor. Designed for investors who appreciate the best-practices index fund investing approach, many robo-advisors do it all for you, at a very reasonable price.
Here’s Why I Like Robo-Advisors
- Robo-advisors consider your financial goals and help you understand how much risk you’re comfortable with.
- Many digital investment advisors then present a diverse selection of mutual or exchange-traded funds (ETFs) for you.
- Investing in this passive, index-fund investment portfolio is quick, secure and easy. You can open up retirement accounts, individual or joint brokerage accounts or others, depending upon the firm.
- Then, periodically, when your mix of stock versus bond funds deviates from your preferred mix, the robo-advisor will sell the over-performers and buy more of the underperformers to get you back to your desired asset allocation.
- Other robo-advisors even offer tax-efficient solutions.
- Some include robo-advisors with human financial advisors.
- Robo-advisor fees are typically lower than those of human financial advisors.
I invest in WiseBanyan, my daughter invests in Schwab, and there are a handful of low-fee robo-advisors that are great for the new investor. If you want a free robo-advisor with access to thousands of investment choices, you can check out my detailed, unbiased M1 Finance review.
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Why I Like Robo-Advisors
These digital investment managers are a great solution for the busy, time-starved guy or gal who wants to get their money working for them. For no-muss, no-fuss investing, robo-advisors are a sensible solution for those who don’t want to go the DIY route. Since I’m a portfolio manager and expert investor, I do most of my investing on my own. But if I wasn’t, I’d definitely invest it with a robo-advisor.
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