The media are fascinated by the new companies use of technology that opens up the investment world to everyone. But the impact on investors of these new solutions are often overlooked.
The robo advisors, or digital wealth managers, are changing the way we invest. Here are five reasons to start relying on these new investment management companies.
1. Expert advice
The internet has enabled anyone to access the world of trading, individuals can now buy and sell securities directly on the financial markets. But many do not have the time or knowledge to be able to do this effectively as the investment options can seem endless. If somebody does not have this knowledge their options have historically been fairly limited with high minimum investment levels at many asset managers and charges from independent financial advisors that make it difficult, for those with lower levels of savings, to efficiently invest.
Digital solutions are designed to close the advice gap. They offer products to investors from across the wealth spectrum. Once you set up an account via a simple online platform, you answer a few questions to determine your investor profile and set your investment objectives you are assigned to an expertly managed investment portfolio to suit your needs. Amateur investors have access to a diversified portfolio run by a team of professionals,
2. Low cost
Many of the traditional options for investments would charge customers between 1% and 2% as a management fee. A provider such as Moneyfarm can keep costs low due to the efficiencies achieved through technology. This impacts the real returns of your investments as you are able to keep more of your returns. This is also true of the instruments digital wealth managers use, by using exchange traded funds these providers are able to keep down all costs and make investing more efficient.
The financial markets are constantly changing and even a well-designed investment portfolio move from its target. Portfolios must be rebalanced periodically. At Moneyfarm we set an annual investment strategy and then make adjustments roughly every 2 months depending on market movements. When investing yourself rebalancing can be expensive and time consuming as your investment is subject to trading fees. At Moneyfarm trading fees are included in the management fee keeping costs to the investor low and an investment committee makes all portfolio decisions making it a simple process for investors.
Know exactly how your investments are performing and how much you’re paying in fees at any time and any where, on the Moneyfarm app.
5. Rational decision making
Our emotions play a big part in our investment decisions which can often lead to decisions that negatively impact long-term returns. Many buy as the market goes up and sell as the market drops, timing the market is difficult, if not near on impossible. By calculating your risk tolerance at the start of the investment journey, digital wealth managers are able to run portfolios suited to the needs of the individual’s profile. The decision making is given over to the provider limiting that emotional bias.