Have you received monetary reward for your hard work in the last financial year?

Well, if you are going to receive an increment, ensure you don’t blow it up.

So if you are thinking about taking on a loan to buy a new car, by utilising your increment to pay for the EMIs, curb your temptation.

Because every rupee you save and invest wisely, will earn you more money; and take you closer to your financial goals.

So what matters to you more?—immediate benefits that last momentarily or long-term benefits that will stay with you forever?

Many of you may not have enough time to meticulously plan your investments and, more importantly, have the discipline to stick to the plan and monitor investments.

If that’s been your reason for being unable to invest your incremental earnings, your worries are likely to be over now.

New robo-advisors are gearing up to serve you better.

Does this mean investors are to trust machines more than humans?

Not quite. Let’s not forget, behind any technology, there’s always a human brain at work. As it is in the case with robo-advisory platforms.

In simple words, robo-advisory is the investment advisory service managed by software-based platforms that use human-made algorithms.

Undoubtedly, robo-investing is a significant development that’s likely to work positively for investors.

What are the advantage of relying on robo-advisors?

• Robo-advisory platforms offer more options to investors as well as to advisors.
• Robo advisors offer consistent advice
• They are better in record keeping

However, please don’t forget, not all robo-investing platforms will be alike. Some may offer you complete automation—which includes creating your financial plan and completing the transactions. While others may offer transaction services with financial advice given offline. With the plethora of automated financial planning services available, you need to choose wisely. Along with the services provided, you need to assess if these robo-advisory platforms are putting your interest before theirs .

Here’s five ways a good robo-adviser can ensure your financial well-being:

1. Understand your financial goals
   
   The key to any financial plan is to set and prioritise your financial goals. If you're in a situation where investments are randomly made without being goal-centric, first align your current investments to your financial goals. A good robo-advisor will help you do just that.
   
   Retirement, savings for a house or property, child’s educations, etc. are important financial goals. With a good robo-advisor, you can set up multiple financial goals simply by entering the details. The robo-adviser will generate a plan suggesting the monthly financial commitment needed to achieve your goals.
    
2. Select the right asset allocation
   
   Calculating how much to save every month is just the beginning. A good robo-advisor understands the need of an efficient asset allocation. The asset allocation is defined based on your risk-profile and investment horizon. Therefore, if you are investing for the long-term or if you are a high-risk profile investor, the plan will include a higher allocation to equity. Conversely, if you are a low-risk profile investor, you will be asked to invest a higher amount in debt. This will ensure that the risk is managed efficiently, without compromising on returns.
    
3. Select the right products
   
   There are myriad financial products available. Most robo-advisors will suggest investing in mutual funds as these are the most convenient instrutments to invest in and you can allocate your funds among different asset classes. However, under mutual funds, there are hundreds of plans available under the different categories. A good robo-advisor will help you separate the wheat from the chaff. In other words, the robo-adviser will select mutual funds that are backed by sound research. Performance will not be the only criteria. There will be different qualitative and quantitative parameters that will be looked at before arriving at the top schemes suitable for your portfolio.
    
4. Creates a habit of investing systematically and regularly
   
   To create wealth in the long-term, investing regularly with discipline and determination is the key. Saving and regular investing can enable you to meet your financial goals in life in a comfortable manner. With a robo-advisor that provides good service, you can just set it up and your robo-advisor will do the rest.
   
   Once you have created an investment plan, your robo-advisor will keep it on track. When investing on your own, market noise may sway your investment decisions. If you buy because the market is bullish, or sell because it is bearish, your financial plan may go awry. The advantage here is that a robo-advisor is devoid of such human biases.
    
5. Low on costs
   
   When planning for their finances or investments, you may tend to ignore costs. Especially, when costs are mentioned in percentage terms, it may seem small and insignificant. However, with the power of compounding , these expenses may eat into a substantial amount of your wealth. Thanks to technology, robo-advisors are able to provide services at a lower cos, and hence, they are relatively cheaper than traditional financial planners.
   
   A good robo-advisor will offer you mutual fund direct plans as an investment option. Over time, this will help you save lakhs of rupees.
   
   With a 24x7-service window, robo-advisors are the future of financial planning and investments in a time-strapped world.
    

A word of caution…

Before you trust a robo-advisory platform, please assess the track record of promoters and their expertise in the field of personal finance.

Add Comments