5 things you should know before Robo-Investing

Since its emergence in 2010, Robo-investing is gaining popularity. Due to their ease of access and low starting costs, Robo-advisors are attracting a lot of investors. Although the majority of the investors still prefer human advisors over Robo-advisors, the young generation is more comfortable with Robo-advisors or Robos.

It’s estimated that assets under management of Robos will reach up to US $2,845,488m by 2025 worldwide. According to Statista, Robo-advisors will be managing US $5,746m for Australian users in 2021.

Before Robo-investing you must know these 5 things.

The Legal status of a Robo-Advisor:

Robo-advisors hold the same legal status as human financial advisors. All of them ensure the security of your assets and data. In addition, they strive to make investing easy and accessible for everyone.

In Australia, the clients’ money is managed through Managed Discretionary Account (MDA) structure. Also, ASIC has robust policies in place to combat any kind of irregularities. Therefore, you should feel at ease while Robo-investing.

Robo-Investing: Performance

The investors who are investing through Robos are getting fair returns on the assets under management (AUM). However, experts think it’s too early to pass any judgments regarding Robo-investing. Because the real test will occur when a crisis hits the market. Only then we’ll be able to evaluate their abilities and shortcomings.

Presently, there are many Robo-investing platforms in Australia that are competing and attracting investors through various incentives.

They act on your behalf:

Robo-advisors shouldn’t be mistaken for advisors who only offer you advice and then you can take action or ignore that advice. When you avail services of a Robo-advisor, it’ll act on your behalf. It’ll make your financial decisions based on your portfolio. They consider your risk tolerance, future goals, and other vital factors while making these decisions.

Since Robos don’t have ulterior motives, they won’t push you for certain investments and dissuade you from others. They’ll always act according to your given data. Some robo advisors like Unhedged mainly earn their money based on their ability to outperform the market so they aim to optimize towards performance.

Why is Robo-Investing successful?

The popularity and users of Robo-advisors are constantly increasing since 2008. Millennials and Generation Z are more comfortable with digital apps and interfaces than Generation X. That’s why the market for Robo-advisory and Robo-investing is constantly growing.

According to a survey, 74 percent of the Millennials termed Robo-advisors as useful for financial planning. Moreover, a survey compiled in the first half of 2021 recorded, that investors are receiving good returns on their assets under management (AUM). In the three-year equity return race, SoFi held the first position with 16.1 percent returns.

The Future of Robo-Investing:

According to CNBC, Robo-investing and Robo-advisory industry is expected to reach $1.2 trillion by 2024. In 2020, Robos managed 30% more assets than in 2019.

Its biggest helpers and promoters are millennials and Gen Z because they’ve grown up in a hyper-digital world. In contrast, Gen X doesn’t trust digital platforms or Robos with their money.

It is one of the reasons that still the majority of the overall assets are managed by human financial advisors.

Experts project that in the future we’ll see a revolution in which Robo-advisors will take over the market. However, this will still be a hybrid Robo-advisory system because humans still need assurance from a human advisor and don’t trust Robos solely.

Afterthoughts:

Keeping in mind the success stories of Robo-investing and ease of access, it’ll be unfair to not give them a try. They’re easily available and allow you to start with as low as you can. There are no restrictions or need for experience.

In addition, if you’ve any doubts you can just clear them without any hesitation that you couldn’t discuss in front of a human advisor. Without interacting with any human, you can just start your Robo-investing journey. Isn’t that awesome!