Not everyone desires or feels obligated to pursue the unusual hobby of managing investments. Automated investing, or robo-advising, lends itself to the idea that people can make money without moving a finger.
For people new to investing or who have grown weary of keeping an eye on stock charts, the process can be one way for you to set it and forget it at a very low cost. But just as importantly, before getting into this, you should know the game.
It Runs on Algorithms, Not Guesswork
Automated investing should not be someone picking stocks for you. It is generated instead by algorithms—intelligent computer programs that follow standard investment rules.
You’ll need to answer a few questions to determine your financial goals, your willingness to take risks, and the duration of your investment. The platform then constructs a pool of investments that fits that profile, showing the benefits of automated investing through structure and discipline.
Robo-advisors prevent people from making decisions on impulse that could potentially ruin their investment. This makes them useful for people who want a consistent, worry-free system free of charge, especially beginners exploring automated investing for the first time.
Perfect for Beginners and People Short on Time
It doesn’t matter how old you are, how much experience you have, or if you know what finance terms mean. The platform takes over once you’ve finished setting it up. It chooses your investments, diversifies your capital in various assets, and reinvests its income—showcasing how automated investing works step by step.
According to a Statista study, more than $1.4 trillion around the globe is invested in robo-advisors, and this figure is about to get larger. The increasing use of these tools in busy lives is a testament to their effectiveness and benefits.
You Still Need to Learn the Basics
Automation may exist, but it doesn’t mean you should ignore it. You do need to know more about the investment, how fees work, and the risk that comes with it. The idea is that while a robo-advisor will take care of the details, you should still know what stocks, bonds, and markets are.
When markets go down, Investopedia notes, you can sleep well at night when you have your basics right. The more you know your portfolio, the less likely you are to panic or act quickly, even with automated investing for beginners.
Low Fees, But Not Free
People mostly choose robo-advisors because they don’t cost much. The majority of platforms impose an annual fee that ranges from 0.25% to 0.50% of your balance, which lowers the amount of money you make. Traditional financial advisors typically charge fees significantly higher than that amount. But it’s not completely free.
The actual investments held in your account—like ETFs or mutual funds—will still have small fees. Morningstar recommended monitoring additional costs, such as minimum balance requirements or fees associated with interacting with a human advisor. While a few platforms are free, some charge additional costs for various services.
Better for Long-Term Goals
In the long run, robo-advisors are used. These platforms might not be good for people who want to trade often or quickly build up their wealth. But if your goals are more long-term, like retirement, buying a home, or paying for school in the future, regular automation can help you stay on track with your plan.
NerdWallet writes that these platforms bail when markets get rocky. They do not become anxious. They follow the plan. In addition, they automatically rebalance your portfolio and invest regularly to help you maintain consistency without requiring constant thought—showing how automated investing maintains discipline during volatility.
Should You Try It?
Automated investing is not meant to take the place of real advisors. It’s about giving more people easy access to smart investing tools. This system might be a good fit for you if you like the idea of setting it and forgetting it.
Pick a platform that matches your goals and comfort level. Take time to understand how it works. After that, check in every now and then to see how your money is doing. To begin, you don’t have to know everything. In fact, you just need to be willing to begin—and let the system do the work in the background.
