There are a variety of tools available to track your investments,. Quicken Premier 2017, Owl Software and Investment Account Manager are some of the tools available to you. The software packages will not only track your investment performance, but also advise on when to investment which funds to invest in, and even minimise your tax liabilities. The question is, given the investment tools provided by robo advisors, are they really necessary? Read our expert Portfolio Management Software guide to find out what exactly you need. Be aware that some robo advisors will offer sophisticated tools that breakdown your asset allocation, performance and also provide tax advice. For tax advice, be prepared to pay more for a blended service, as typically a robo advisor that offers this requires the expertise of a human financial advisor. If this is something you need, look for a blended service. See our reviews page to find out more about blended services.
What is investing software? A better term for it would be trading platforms, or brokerage platforms like the ones you would use to trade stocks or Forex. You will need to create an account and deposit with the broker, then they will provide access to their trading platform. Through these platforms you can buy the same ETFs that robo advisors invest in. Of course, you only need such a platform if you are self-investing, but if you are, it is an absolute necessity. There are a number of low-cost brokers that allow you to invest in a wide variety of ETFs (and other instruments), and also provide high quality charting to identify price trends and patterns. Here are some of the best options for investing software that will help you with your investing. If you plan on investing in a Self-Invested Personal Pension, this kind of platform is something you will need.
Are some robo advisors really free? Well, technically speaking, yes. There are some that have zero management fees. That doesn't mean their services are entirely free, however. It is important to understand that most robo advisors charge a management fee (for the trouble it takes to create and manage the algorithms and cover the costs of running a business), a setup fee, and an ETF fee. The ETFs are the funds that robo advisors invest in, and those funds charge roboadvisors a fee for the privilege. After a potential setup fee, there are therefore two fees that you typically need to pay. But some robo advisors will charge zero management fees, like Schwab's Intelligent Portfolios. They can do this because they are owners of ETFs themselves, and have a different business model, making money from ETF fees, rather than management fees. Does this make technically "free" robo advisors cheaper than others? Not necessarily, because it all depends on the ETF fees. This means you should look closely at all fees charged by robo advisors, and not just the management fees. Sound confusing? Don't worry. See our complete breakdown of robo advisor fees, and see exactly what you pay with each robo advisor. In any case, roboa advisor fees are significantly lower than traditional money management fees.
Where do you start when looking for a robo advisor? What makes a robo advisor a viable option for investing your money? We break down each robo advisor based on a few different criteria. First of all, what fees do they charge? We like to see low management fees, a low sign-up fee, and low ETF fees. We also like to see how much Assets Under Management (AUM) the firm has. This is important because the more money managed by the robo advisor, the more stable it is. A new robo advisor with small amount of AUM may have difficult covering the costs of running its business and is more likely to go to bust than an established firm. We also look at whether the site is easy to use, what tools they have to track performance and the sophistication of the investing - bear in mind some robo advisors are more advanced than others, and should (in theory) have better risk/reward ration than others. Your best starting point is to go to our broker reviews page, identify robo advsiors in your region, and look for low fees for your particular deposit amount. From there, you can drill down into the details and get what you need for your unique requirements.
Intelligent Investor Portfolios, or Smart Portfolios, simply refers to investments that are designed to allocate your money to different assets to maximise growth and minimise risk. The same then as traditional investing then, and in that sense roboa advisors are no different to traditional portfolio managers. These are terms that you will here in conjunction with robo advisors, but in essence refer to established concepts of investing. The hallmark of Intelligent Investor Portfolios is diverse allocation into assets thata re likely to rise in value according to financial trends and broader economic cycles. The main theory that underpins Intelligent Investor Portfolios and robo advisors, however, is Modern Portfolio Theory (MPT). This theory accepts that in order to increase profit, more risk must be assumed. We take that as a simple fact, but what is clever about MPT is that it identifies the optimal level of reward versus risk, meaning there is a level at which the prospect of extra returns does not outweigh the possibility of losing money. In other words, MPT ensures the risk/reward ratio is skewed in your favour. This means that you are more likely to make money than lose it, and if you make money, you'll make a greater percentage return than the percentage you'd lose should you be in a losing scenario. To learn more about this, and how roboa advisors apply MPT, read our Intelligent Investor Portfolio guide.