Understanding Robo-Advisors and Automated Investing

Understanding Robo-Advisors and Automated Investing Video

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Robo-advisors and automated investing platforms are becoming one of the most popular ways to start investing. It’s estimated that there are currently over 100 robo-advisor and automated investing platforms operating in the United States. If you’re new to investing and finding all the terminology a bit confusing you’re not alone. You may find yourself like asking. What is a robo-advisor? What is automated investing?



Understanding Robo-Advisors and Automated Investing



Understanding Robo-Advisors and Automated Investing

In this short video, I will simplify and demystify the world of robo-advisors and automated investing. And provide you with an understanding of the technology and the industry. Also, I discuss the topic of Socially Responsible Investing (SRI). SRI investing strategies are easy to implement with automated investing platforms.

And finally, I will help you answer the question, is a robo-advisor right for you.

Watch this comprehensive video to learn more.





No Time to Watch the Video Here is a Quick Summary.

What is a Robo-Advisor and Automated Investing?

From an FTP perspective to understand robo-advisors, start by separating the business from the technology.

The Business

A robo-advisor is an asset management firm whose primary business is using automated investing technology. Automated investing is their only business. For example, Acorns, Betterment and Wealthsimple are robo-advisors.

Automated Investing

The technology used to automate the investing process. The technology can be used by any asset management company to provide automated investing services. How the technology is used to automate investments can vary from company to company. For example, discount brokers like E*TRADE have created a product called PreBuilt Portfolios. Charles Schwab calls their platform Intelligent Portfolios, for instance.


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How Automated Investing Works?

The goal of any automated investing platform is to minimize human intervention. As a result, investors open and fund their account online. Then answer a set of questions to help determine their investment strategy. The technology then takes over to invest those funds into pre-determined investment portfolios. 

The Key Points on Robo-Advisors and Automated Investing

  • Management Fees. In general, asset management fees for robo-advising services are lower than with traditional (human) financial advisors.
  • Account Minimums. Low account minimums provide novice investors with the opportunity to start investing. For example, Wealthsimple has no account minimum.
  • Types of Accounts: Savings accounts, IRAs and personal investment accounts are supported by most robo-advisors.
  • Funding an account: All automated investing platforms will support one-time deposits or recurring direct deposits from a savings or checking account.





Socially Responsible Investing – SRI

Matching investor values with socially responsible companies is what Socially Responsibly Investing is all about. SRI themes include but are not limited to, the environment, human rights, and ethnic diversity.

In the past, investing in socially responsible companies required research to determine their SRI cause. However, automated investing has streamlined this process to allow investors to easily select SRI specific portfolios. SRI portfolios may consist of ETFs or Mutual Funds that contain socially responsible companies and/or organizations.

Is a Robo-Advisor and Automated Investing Right For You?

  • If you’re a DIY investor and like to control the management of your investments, you will find robo-investing too restrictive.
  • Want nothing to do with the investment process? Your best bet is to use a financial advisor.
  • If you want to start investing. Start retirement planning by opening an IRA account. Than a robo-advisor and automated investing is probably the right platform for you.

The Final Word

It’s a popular misconception that because Automated Investing is automated, that there is no one to talk with regarding your investments. Not true. Most robo-advisors will provide a “real” person to help you set up your account. And complete the initial online questionnaire so you can get started.

If you have no retirement plan, want to start investing and take a semi-passive approach to investing (set it and forget it). Robo-advisor and automated investing platforms are a good place to start.


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Do you use a robo-advisor to manage your investments? Comment below.





Kevin is the owner of FTP and the author of the personal finance book series Filling The Pig. He uses his past successes and failures with debt, saving cash, investing and running home-based businesses to educate others about successful money managment and Creating a Lifestyle of Opportunities.

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2 thoughts on “Understanding Robo-Advisors and Automated Investing Video

  1. The information puts a whole new light on investing. Due to the fact that most investing needed major amounts of investment money, I really haven’t researched the topic at all. This new information provides a great basis for learning about investing in general and specifics about new methods of investing. Thanks so much for the education.

    • Thanks, Carol for the feedback. You’re right the misconception is that you need a lot of money to start investing. That’s just not true. Contributing small amounts of your paycheck to a Robo-advising platform, a 401(k) or even an IRA are great ways to get started. And learn something about investing during the whole process.

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