If you want to get into stock market investment but are too lazy to know how it works, then you’re going to need the services of a robo-advisor. Robo advisors are digital investment platforms that offer algorithm-driven and automated investment services. Basically, what robo-advisors do is that they invest your money for you so you don’t have to. Robo-advisors are also the recommended option for those who don’t want to pay higher costs for regular consultations with a professional financial advisor. However, choosing the right robo-advisor to achieve your long-term financial goals is easier said than done. There are a few considerations that beginners need to take note of when looking for a robo advisor.

Management fees

Most robo-advisors charge their clients annual management fees, calculated as a percentage of clients’ investments. Some robo-advisors base the management fees on the total annual investments, depending on their own policies. If you’re after a robo-advisor with lower management fees, then you might be forced to make a huge investment upfront. Most robo advisors only lower fees if you meet a certain investment minimum.

Minimum investment

Since you’re just starting out in stock market investment, it’s ideal to go with a robo-advisor with no minimum investment. However, most robo-advisors that don’t have minimum investment requirements tend to charge their investors more and higher fees. In general, if a robo-advisor offers personalised services and access to a dedicated financial advisor, the minimum investment required for it will be higher.

Financial advice

While the services of robo-advisors mainly depend on algorithms, there are robo-advisors that complement their services with interactions from real financial experts. That way, there are more nuances in terms of investment options offered to customers. As expected, the robo-advisors with a team of financial experts offer their services at a much higher price, so make sure that you’re prepared for the expenses in case you go with this option. If you’re fine receiving advice only from the algorithms that give robo advisors their name, though, then there’s no need to bother looking for a robo-advisor that also offers consultations with professional financial advisors. This is the recommended option for those who have little time to consult with financial advisors anyway, such as full-time parents and business owners. In fact, when the owners of Tow Truck Singapore decided to invest in the stock market, they opted for a robo-advisor that operates purely on algorithms. Both owners just let their chosen robo-advisor choose where their money goes while they focused all their attention on their business. So far, they have seen positive growth in their investment, proving that robo-advisors without real-life financial advisors can be trusted too.

Services offered

Besides fees and financial advice, you also need to consider the scope of service of your chosen robo-advisor to make sure that you’re getting your money’s worth in the annual fees deducted from your investments. Some of the common services offered by better robo-advisors are portfolio allocation, tax-loss harvesting, waived withdrawal fees, and automatic rebalancing, and more. Most of these are pretty good features as far as robo advisors go.

Investment options

If you want to know where your money goes upon giving it to your robo-advisor, then you have to check the expense ratio of your investments. Most of the fees given to a robo-advisor are directed to exchange-trade funds, index funds, and more, all of which make up your investment portfolio. Your goal must be to find a robo-advisor that keeps the expense ratio as small as possible to ensure that your money isn’t placed somewhere that won’t help your investments grow. Our suggestion is to take a good look at the total cost to get a full picture of where your savings might be going. That way, you’ll know if your robo advisor will lead to you bleeding out profits unnecessarily.

Conclusion

Anyway, that’s it for our list on how to pick the right robo-advisor to invest with. As a beginner, you have to be extra careful when choosing the right robo-advisor as it’s your savings that’s on the island. More than the fees, you have to consider where the robo-advisor invests your money, how it provides financial advice, and the scope of its services. That way, you know that your savings are safe and that you're getting your money’s worth. If you can think of other considerations when looking for the best robo-advisor on the island, don’t hesitate to share them with us! We love hearing from experienced investors about how they started out when they were also new to investing.