Investing advice is everywhere! It’s on TV; it’s all over the internet; it’s in newspapers and magazines and it fills the pages of dozens of books.
With this overabundance of information, you’d think nearly everyone would be financial experts. Actually, though, financial genius eludes most people and they’re wanting professional advice.
Think you can’t afford such advice? Think again. There’s investing advice available to suit every taste, and for every budget . Here’s a small sampling of investing resources for you to check out:
401(k) plan advice
One option might be a lot closer than you think: your workplace. While you may already be taking advantage of your employer-sponsored retirement plan, you might not know – or you might not be using – the free or discounted advice your company offers from the plan provider. Ask your employer before searching for an advisor of your own.
The default option for investing advice is also the most expensive. Financial advisors will expertly manage your portfolio, but they come with a hefty price tag. Many advisors take a percentage of the assets they manage, generally one percent, which can amount to more than you want to pay. Alternatively, they may be paid through a retainer on their services. Both payment systems can be costly and are usually only the option of choice for high-end investors. In addition, many financial advisors will only work with a minimum investment (typically $500,000) that might be way above the amount you plan on investing. Those who do work with less money often charge double the going rate in annual fees.
Fortunately for those with a smaller net worth, there are excellent options. One popular choice for affordable investment advice is the robo-advisor. Essentially, a robo-advisor is an algorithm. You give it your basic background and tell it a bit about your financial goals, and it recommends an asset distribution based on those factors.
Here are some ways a robo-advisor compares with a human advisor:
- Most robo-advisors bill on an assets-under-management scale: The more you’ve invested with them, the more they charge you. In contrast, a human advisor will also charge for time spent in meetings, preparing reports and other tasks related to managing your account.
- Quality of advice. Most financial advisors, both human and automatic, subscribe to Modern Portfolio Theory, which posits that markets tend to increase in value over time. This theory is easily reducible to an algorithm, and therefore the quality of advice offered by a robo-advisor tends to be nearly identical to that of a human advisor.
- Robo-advisors give one-size-fits-all advice. If you have a major life event impacting your financial status, such as an unexpected raise, the robo-advisor won’t know that. You’ll need to input all your information again and start over.
- The fact that robo-advisors are only available online can be both a blessing and a curse. It’s convenient if you’ve got easy access to a Wi-Fi signal, but not so much if you live somewhere that doesn’t have a reliable signal.
If you like the low cost of a robo-advisor, but don’t like the idea of trusting a machine with your investments, you might want to consider a hybrid service. It gives you the best of both worlds. A hybrid service offers automated features, like the robo-advisor, with the option of speaking to a flesh-and-blood advisor when nothing but the human touch will do.
Do you think machines can do a better job at picking the perfect portfolio? Or do you think nothing beats the human touch? Let us know in the comments!