Betterment, for example, has seven different portfolios, including a core, smart beta and target income portfolio, three “socially responsible” plans, plus a cash reserve. Robos that offer multiple portfolio types-not all do-will also ask you to choose one. “You could shortchange yourself on the long-term growth or your portfolio,” says David Goldstone, editor of The Robo Report, published by Condor Capital. Wealthfront, for example, will ask what you would do if your portfolio lost 10% of its value in a month: sell some or all of it, do nothing or buy more? Fidelity Go asks initially to rate your risk tolerance on a scale of 1 to 10, from least to most.īe honest in your answers, since fibbing will only hurt yourself. The risk tolerance questionnaire is key, since it will go a long way to determining what investments the robo chooses for you. In addition to choosing an account, you’ll also be asked to provide information about your financial situation, goals and risk tolerance. Answer questions about what kind of investor you are IRAs and Roth IRAs offer attractive tax benefits, but come with contribution limits and restrictions on how and when you can withdraw your earnings. A taxable account allows you the most flexibility because you can withdraw your money any time for any reason, but if you receive dividends or realize capital gains, you may end up with a tax bill. Depending on the robo advisor you’ll first have to indicate whether you want to open a taxable account or a retirement account such as a traditional IRA or Roth IRA. To open an account, you’ll need to sign up at the robo’s website. While all robo advisors work a little bit differently, here are the basic steps you will go through to get started. Most allow you to sign up from your computer or phone in a matter of minutes. Getting started investing with a robo advisor is designed to be easy. How to start investing with a robo advisor If you are looking for a simple, hands-off way to grow your wealth-perhaps for a down payment on a house, a future college education or retirement-then a robo like Betterment or Wealthfront, both among Buy Side from WSJ’s picks for Best Robo Advisor, could be a good option. Power and author of the company’s recent U.S. “If you are someone who doesn’t have the time, interest or expertise to manage your own investments, these are a compelling value proposition,” says Mike Foy, head of wealth intelligence at J.D. This convenience, along with robos’ typically low fees, are a big reason these services, which first began appearing about 15 years ago, have been surging in popularity. That’s where a robo advisor can help.Ī robo advisor is a digital, automated service that makes investing easy because it picks securities for you. You could try to hire a financial advisor, but few advisors want to manage portfolios under $500,000 or more and cost thousands of dollars a year. Say you have a few hundred or a few thousand dollars to invest, and you’re busy or just not comfortable overseeing those sums by yourself.
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