robot investor

The use of robotic financial managers, popularly known as Robo-advisors, saw a participation surge in the first quarter of 2020 and have gone on to become a predominant feature of the economy since then. They provide guidance to people looking for virtual, cheap advice on investment and low-cost financial advice.

As the number of online Robo-advisors continues to increase, so does the range of services.

Many now offer socially responsible investment portfolios, access to human financial advisors, and comprehensive digital financial planning tools on the internet.

No, we’re not talking about R2D2 buying and selling shares on the New York Stock Exchange, but rather a series of algorithms that decide which the best investment for you is and manage your portfolio based on pre-established rules.

These robotic managers, popularly known as “Robo-advisors,” have simplified the investment process. 

Setting one up is a fairly simple process, You take an online test, refine your profile, and then adopt a portfolio tailored to your characteristics.

You then deposit your money in the account – and you start investing on autopilot.

Betterment and WiseBanyan

The first of these firms, Betterment and WiseBanyan, was started in the United States in 2008.

Each already manages around 20,000 million dollars, allowing people to invest through a diversified portfolio algorithmically with fewer management fees, all delivered online in seconds.

TD Ameritrade

TD Ameritrade uses a combination of modern technology of automated type of investment and good old fashion advice in which investors can walk into any of its branches for a one-on-one sit-down financial session with a human financial advisor, the best platforms to invest in.


Sigfig, a US-based Robo-advisor, is said to be among the top five best Robo-advisors in America, according to Backend Benchmarking.

One of its top performance reasons is its low fees and access to human financial advisors. They also have the best track record of performance, a competitive management fee of 0.25% annually.


Wealthfront is another financial startup from the United States.

It is one of the pioneers in automated investment management (Robo-advisors) and, since 2008, automatically manages assets of thousands of clients online in exchange for a management commission ranging from 0.25% to 0.40%.

Wealthfront invests in index funds through a database that decides where and what the client should invest in.

Pros and Cons of Wealthfront 

According to users, these are some of the things they like the most about Wealthfront:

Commissions: for all cases, management fees are an extraordinarily low 0.25%.

Their Team: The discussions in forums talk about the Wealthfront squad, with Andy Rachleff and Dan Carroll at the helm but with Burton Malkiel, one of the most recognized figures on the global investment scene, as CIO (Chief Investment Officer).

Investment objectives: offers investment routes based on goals such as saving for a home or for retirement.

Promotions: We’ve seen more than one one-time, commission-free offer for balances under $ 5,000. If not, always 0.25%.

These Are Some Weaknesses:

Retains future commissions: one of the most common criticisms of Wealthfront is leaving without investing an amount equal to the balance of your future commissions due to them for a year.

It does not support partial purchases of ETFs: it never squeezes your balance to the maximum for you to understand, not divide actions to only purchase one hand, so there is always chump change in the account.

Minimum investment of $500: it’s an issue that may cause them to miss out on small investors.

These are not significant disadvantages, but they are the most common complaints from users.

Investing Through a Robo-advisor Is Very Easy:

The first step is by taking a test to institute your profile as an investor to ascertain your risk-taking level.

After this process is established, the Robo-advisor provides an open account for you with an e-wallet where you will be required to deposit the minimum account needed for the account.

From there, the automated manager (Robo-advisor) will invest it in the funds that make up the chosen portfolio.

The process is quite simple and can be done from the comfort of your home while connected to the internet; the Robo-advisor makes changes when and where necessary to keep your wallet functional.

Main Differences Between Robo-advisors and Traditional Fund Managers

The main differences between conventional managers and the new automated Robo-advisors are as follows:

1. Objectivity: impassive management of your portfolio

Like it or not, humans are imperfect. Often, we make mistakes, especially when it comes to money. 

To further buttress this point, the effect of sunny or cloudy economic weather on the price of a stock in the stock market has been well documented and guess what; there are parallels to moves in share prices.

Robo-advisors aim to remove the variables from the equation. They stick to their algorithms no matter what people Tweet or the latest background noise regarding the overall economy. 

But in reality? The human factor is always there; the last word is up to the client, who decides whether to increase the investment, keep the portfolio, or withdraw the capital. 

Unfortunately, no system has yet been invented that prevents customers from reacting off the cuff and withdrawing money during times of uncertainty.

2. Personalization: a tailored plan for your money

Another contrast is the degree of customization. If you enter a broker to find an investment fund, you will find hundreds or thousands of alternatives. Some can be good choices, some bad, and some terrible.

It is expected that not everyone feels able to choose an asset mix according to their investment style, risk tolerance, and time horizon.

Robo-advisors’ database is useful in times like this when, based on a series of questions; they define your investor profile and offer you a portfolio adapted to your needs. 

It is not that they create a portfolio for each client, but rather that they usually simplify it with 5 or 10 options that should be adapted to different investor profiles.

3. Commissions: low-cost investment strategies

A low-cost mechanism was experienced in the seventeenth century, where costs were lowered by replacing workers with machines.

Well, saving the distances, we see something similar with these fintech companies.

In conclusion, robo-advisors are cheaper, more effective and more modern, so, yes, you can let them invest your money.

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Sandra Royal

By Sandra Royal

Sandra Royal is a financial analyst, writer and editor.

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