financialtreat – will explain about Robo Advisor, Investment Solutions in the Digital Age that you will get in the following article. Let’s look at this article carefully!
Robo advisors may still be unfamiliar to the ears of ordinary people, this is because the tool is related to investments that arguably are still not too widespread among the public.
However, money investments such as stocks, bonds and mutual funds that were doubted because of the difficulty of understanding and lack of socialization, are now widely used as an alternative savings / money deposits because the benefits can be many times than saving in savings accounts in general.
The growing public awareness of the importance of an investment and its various benefits make the development of investment instruments until the supporting technology is increasingly advanced. It is on that awareness that robo advisors are born in our midst.
Well, for those of you who are still unfamiliar with what a Robo advisor is, see the following explanation to get acquainted more deeply with this investment tool. Happy reading!
What is Robo Advisor?
Robo Advisor is a digital platform that helps manage different types of financial services and financial plan setups, with little or no help with human resources. Robo Advisor was created through advanced algorithm programming technology that can provide personalized solution suggestions to find the best program according to the data entered by the investment platform and information from customers themselves.
In terms of investment robo advisors serve as a technology that can help design optimal investment portfolios based on age, risk profile and life goals, automatically.
So, with robo advisor investors / potential investors do not need to consult with a financial planner. Because, robo advisors will automatically create an investment portfolio that suits the needs of customers / prospective customers by using algorithms.
Robo advisors only work based on exact data inputted on the system. From this data, the robo advisor will make a portfolio decision on what is needed. Creating a robo advisor is suitable for investors who prefer to manage their own investments but want to optimize their investment portfolio.
How Robo Advisor Works
In general, robo advisors have 3 basic work systems to help customers in forming, creating, completing and improving investment portfolios online, namely:
Auto Risk Profiling: where customers must answer questions / surveys that the digital investment choice platform selected in order to determine our risk profile with an algorithm without bias.
Another Auto Financial Plan: the next robo advisor will provide the best investment portfolio allocation or the one that best matches our survey answers.
Auto Rebalancing: maintaining our optimal allocation in line with market changes to reduce the risk to investments as much as possible.
Procedures for Using Robo Advisor
If explaine, here are the stages that will be passe by customers who want to get the best investment portfolio with robo advisor technology:
1. Fill out online questions/surveys
The first step to being able to use a robo advisor we have to answer several questions / surveys so that the robo advisor system can find out our risk profile. This is very important to be able to produce an investment portfolio that suits your needs. As when consulting experts, we will definitely be given questions as well as when using robo advisors.
2. Create an account to start investing
After filling out the risk profile survey, the next step is to create an account with the robo advisor company to store the funds to be investe. This account can then be accesse automatically by a robo advisor so that customers can make all investment activities automatic.
3. The collecte data is processe by a robo advisor
The risk profile data obtaine from us after filling out the survey will be automatically processe by the robo advisor. As mentione earlier robo advisor processes the data base on algorithms. Therefore, it is expecte to fill the data with real so that the investment generate is really in accordance with what is desire.
4. Robo advisor will recommend the most suitable portfolio
After processing the data that has been collecte, the robo advisor will provide some portfolio recommendations to customers. Then, robo advisors can automatically buy the recommende investment products with money deposite in the customer’s investment account.
5. Balancing the portfolio
Over time, investment gains can change. If our investment profits will be uneven then the proportion in the investment portfolio can change and not necessarily optimal anymore. Therefore, robo advisors will automatically monitor and balance the portfolio periodically not only to optimize profits but also minimize risk.
Advantages of Using Robo Advisors in Investing
1. Lower cost
Robo advisors who charge base on the percentage of assets usually cost around 0.15% to 0.5% of all investment assets owne. This cost is relatively cheap because robo advisor companies do not need to provide labor to serve investors directly (because it has been replace by robots) compare to the costs charge if using conventional consulting services / financial advisors which certainly require more operational costs.
2. Ease investment activities
Using Robo Advisor will make us not need every time in supervising changes to the investment portfolio because the task can already be done by a robo advisor. If the investment is direct, of course, we must always supervise the changes that exist in the portfolio.
We can also more easily enter the trading market and follow the trade in that market. In addition, access 24/7 makes it easier for us to access financial portfolios.
3. More Efficient and Practical
Using Robo Advisors to organize portfolios is considere more efficient than using the services of traditional financial advisors whose procedures are more complicate. Where we have to call a financial advisor first or meet in person to organize our portfolio. In addition, we must explain the financial condition, fill out the require documents, and wait for the desire results.
While with a robo advisor these things can be done with just a few clicks. And can be done anywhere in arranging and determining the proportion of the client’s investment portfolio.
And as explaine earlier, robo advisors can operate automatically for 24/7. So that we can leave the machine working while doing other work. Of course, this is very efficient and practical compare to using the services of a financial advisor.
4. Portfolio Recommendations Are More Targete
Because the recommende portfolio is base on data from the survey we fill. The accuracy of the portfolio to the recommende investment product can be very high or it can reach 90%. More with the suitability of our financial situation and personality. Make the investment chosen base on the robo advisor’s recommendations safer and more profitable.
In addition to being more efficient. Robo advisors can also be the most appropriate medium for beginner investors who are just learning to invest with little investment risk. Now digital investment platforms that provide robo advisor features in Indonesia also exist. We only need to register because the platform access is easy and also secure.
Disadvantages of Robo Advisor
As with tools in general, in addition to having advantages. There are several shortcomings of robo advisors that investors must misinterpret, namely:
1. Investors cannot choose certain assets
The first drawback of using this technology is that you cannot choose certain assets to include in one of your asset portfolios. That is, for the portfolio, you have to buy that asset-that’s all.
Another than that, to maintain a balance of portions between each asset. You usually have to buy all assets in the portfolio that use the recommendations of the robo advisor. For example, if you use a robo advisor from the Bibit application with an arrangement of RDPU 25%. You have to buy mutual funds of Rp 100,000 in one purchase to be distribute according to the portion of assets. So, for the portfolio, you can’t just buy RDS or RDPU, it has to be everything.
2. Less flexible
Another drawback of this platform is that it is less flexible. This less flexible intention is that robo advisors are less able to adjust recommendations according to market conditions. So that several times investors have to lose money because they use the recommendations of this platform.
Also rad more financial management:
- Get acquainted with the Financial Pyramid of Planning a Retirement!
- Cloud Computing and Its Role to Drive Your Business Growth
3. Cannot consult personally
Finally, the downside of robo advisors is that investors cannot meet directly with the robot. And consult personally either to improve their investment portfolio or to simply develop self-knowledge.
In this sophisticate era, there are many technologies that can help humans in many ways including finance with robo advisors. However, whether we realize it or not we as humans still need to interact with other humans who in this case are expert financial planners. Combine the two and make the best decision for your investment.
That was the explanation of robo advisors. Hopefully this article can help especially for those of you who want to plunge into the world of investment.