How Does a Robo Advisor Work?
Once you open an account, you’ll need to to provide your personal details and investment goals. Following this, you’ll need to deposit your initial investment amount.
With all this information, your provider will determine where and how to invest, offering you investments that match your chosen parameters.
How to Choose the Best Robo Advisor?
The first thing you will want to consider is the annual fees. Every platform has a different set of fees. Usually, these will vary from 0.25% to 1%. Fees may also be higher for smaller or larger investments.
On top of this, you also need to look into minimum investment and risk options for each platform. If they do not match your investment goals, there’s no point in opening an account with them.
Finally, ensure to read customer reviews .
Best Robo Advisors in Singapore (2021)
What Asset Classes Are Included?
Most commonly, providers invest in a mix of commodities, bonds, ETFs and stocks. Each platform has a different set of asset classes that they work with.
What is the Difference Between Exchange-Traded Funds and Unit Trust?
Most platforms go with ETFs as they are easier to invest in. Your robo advisor can create quite a substantial portfolio using them, making it easier for you to invest safely.
The advantage of unit trusts is that they are controlled by professional fund managers, which likely gives you higher returns.
Advantages of Using a Robo Advisor
User Friendly
They basically give you a step by step guide of what to do and then work out the rest for you. They are great for beginners with a basic understanding of how investments tend to work.
Lower Fees
These platforms have very low management fees yet can grow your portfolio to similar levels as other providers. They work well for both beginners and advanced investors alike.
Very Low Investment Minimums
Some providers require as little as S$50 to get started. You won’t find many other providers with such low investment options.
No Lock-in or Early Withdrawal Fees
Unlike with other investment providers, you can usually take your investment out of your account without paying any penalty fees. This means you can close your account and take whatever profit you’ve earned at any time.
Diverse Portfolio
Robo advisors tend to give you multiple investment options to take on at once. This allows you to have a multitude of assets at the same time. Of course, most of these investments will be quite small. That being said, it does provide you with more options for moving investments around.
Disadvantages of Using a Robo Advisor
You Need to Manage Your Own Portfolio to a Degree
While algorithms will calculate your investment strategy, it may not always be perfect. Since plans are based on provided investment goals and can’t understand personal circumstances like a real financial investor advisor could, you may need to adjust your portfolio manually from time to time.
Little Long-Term Results
While quite a few people already use such services, most of them don’t have long term results. This makes it risky if you aren’t sure about your returns..
Robots Won’t Differentiate Your Morals
Many people do not wish to invest in industries that they do not agree with, such as alcohol, tobacco or weapons. A robo advisor will not be able to understand this and will attempt to invest without your consent. You can adjust your portfolio manually to avoid this.
Extra Charges & Fees
Most platforms come with sign up and interest fees. Typically, a sign up fee will be around S$18.Utilizing foreign currency will also bring about an additional 0.16-0.3% exchange fee.
What Exactly is a Robo Advisor?
It’s an electronic advice investment service. It uses a machine learning algorithm to provide this advice. The service offers free maintenance for your investment portfolio. The program will calculate your ideal investment strategy via your financial goals and risk level.
General fees & minimum investments as follows:
- • A Minor Management Fee of 0.5% to 1%
• A Minimum Investment of $100
Are Robo Advisors Regulated by the Monetary Authority of Singapore?
Yes, they are regulated by MAS. They are required to be licensed with SFA or FAA. MAS tries their best not to slow down this developing industry.
Most platforms can be licensed as long as the board contains at least several experienced members. However, they will have limited investment options if they do not provide all requirements.
What Could I Use Instead?
You could go through a typical brokerage firm, a financial advisor, or your bank. These tend to be more expensive so consider moving your investments to a robo advisor.
Who Should Use Robo Advisors?
They are best for people aiming at smaller investments who have a basic understanding of different assets classes and investments types.
Why invest through robo-advisors when we can buy ETFs directly?
The rise of Robo Advisors has its benefits. The fees are relatively lower and traditional banks have launched their own robos as well. Their convenience makes them a good entry stage for new investors to have a good idea of asset allocation and what are the common used ETFs and funds by the professionals. Having someone do the allocation for you makes it easier to start investing, and easier to stay invested.
Stashaway vs AutoWealth?
There are slight differences between each robo advisor, more than just the costs. StashAway is good for large investments while AutoWealth has a dedicated wealth manager assigned to each user. So the choice is really up to you, based on your needs.
Have about $2500 to invest in stocks every month. Which one should I go into if I’m not familiar with investing?
Hello Kevin, just a humble suggestion: Robo Advisors. They are a good starting point for people who are interested in investing.
Robos – What’s good?
The rise of Robo Advisors has its benefits.The fees are relatively lower and traditional banks have launched their own robos as well. Their convenience makes them a good entry stage for new investors to have a good idea of asset allocation and what are the common used ETFs and funds by the professionals.
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Thanks Zortilonrel! Happy to know that you like our content, we strive to provide financial tips to improve audience overall financial literacy.
Should I give Robo Advisors a shot?
Hi Randy, the rise of Robo Advisors has its benefits.The fees are relatively lower and traditional banks have launched their own robos as well. Their convenience makes them a good entry stage for new investors to have a good idea of asset allocation and what are the common used ETFs and funds by the professionals. Hope it helps!