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Is A ‘Robo Advisor’ In Your Financial Future?

[ad_1] Question: Would you trust a robot as your financial advisor? The question is not farfetched. Today, there are a large number of financial management companies that use robots a.k.a. Robo Advisors to advise and manage the accounts of investors.

The largest of these companies by assets are in the United States, Great Britain, and Canada and include:

  • The Vanguard Group
  • Charles Schwab Corporation
  • Betterment
  • Wealthfront
  • Personal Capital
  • Nutmeg
  • Wealthsimple
  • E-Trade
  • Ally Financial

Again, this list represents the largest financial management firms. There are a whole lot of companies today that feature these advisors.

What Is A Robo Advisor?

To understand the concept of robots providing investment advice you need to know exactly what Robo Advisors are.

First introduced in 2008 during the financial crisis, these advisors are financial counselors that offer financial advice or investment management online with some or very little human intervention. Their advice is based on mathematical rules or algorithms that are operated by software that manage and improve a client’s assets. The Robo Consultant commonly assigns a client’s assets on the basis of risk preferences and desired target return. These robots can apportion assets into a number of investments including stocks, bonds, futures, commodities, and real estate. However, in most cases, the resources are guided into Exchange-Traded Fund (ETF) portfolios. An ETF is a marketable security that tracks an index, commodity, bonds, or a basket of assets like an index fund and they trade like a common stock on a stock exchange. Clients can choose to be passively or actively involved in the process.

How Robo Advisors Work

When a human client first encounters a Robot Advisor he is asked to provide information on his current financial condition and his future goals. The Robo Advisor takes this data and computes where the client should invest his money. The suggestions are based on a given level of market risk…

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Sourced from by Robert K Janis

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