If you're looking for a lower-cost way to manage your investments and achieve your investment goals, the solution might seem rather futuristic: enter robo-advisors.
Robo-advisors use algorithms to manage your investment portfolio. An algorithm is basically a mathematical model that utilizes multiple pieces of data to recommend or choose a particular solution or answer. Robo-advisory is becoming more popular, especially among younger investors. A 2019 survey by Investopedia found that 20% of affluent millennials (ages 23-38; median income of $132,000) currently use robo-advisors compared with just 13% of generation X (ages 40-55) respondents.
Even if you feel as though you have a solid understanding of investing, managing money takes time. You need to do your research, look at fees, consider interest rates and read up on trends. It’s not everyone’s cup of tea. I, for one, prefer coffee ... in that I'd rather leave the investing to someone else. Or so I thought.
My husband and I were in need of a big picture financial plan for our family, so we started working with a financial advisor. We’ve had scattered accounts for years — 401(k) accounts from various employers, IRA and Roth IRA accounts, a couple of 529 college savings accounts for our kids, checking and savings accounts — and wanted to consolidate everything.
But then our advisor took an extended sick leave, and we found ourselves researching other ways to manage our investments — in particular the robo-advisory trend I’d been reading about. Following are some questions that I raised — and the experts I tapped to help answer them — as I explored this brave new investing world.