Robo-Advisor Investing vs DIY Investing: Which is Better?

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Robo-Investing vs DIY Investing: Which is Better?
Robot hands and fingers point to laptop button advisor chatbot robotic artificial intelligence concept
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Roundup of Robo-Advisor Investing

Fintech made it easier for anyone to invest. You don’t need to hire an expensive financial advisor anymore. Today, you can choose a robo-advisor to do everything for you for a fraction of the cost of an advisor. You could also chose DIY investing where you call the shots. 

Which way is better for you?

It depends on two factors – your risk tolerance and time available to manage your investments. Here’s how to decide which is better for you.

How Much Involvement do you Want with your Robo-Advisor?

Ask yourself, how much do you want to be involved in every investment decision? Do you want to choose each stock, bond, ETF, and mutual fund you invest in or would you prefer a programme do it for you?

Some of the best robo-advisors offer a little flexibility, allowing you to customise a few investments in the portfolio. This happens most often when you want a specific socially responsible investment in your portfolio or you want to exclude a specific company for personal reasons.

If you want more control over what’s in your portfolio, DIY investing is the better route. You control what you invest in when you sell it, and what you do with the money. It’s a big responsibility, though, so choose it carefully.

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What’s your Risk Tolerance?

Think about your goals. Are you saving for a long-term goal, such as retirement 30 years from now, or a goal that’s a few years away?

If it’s a long-term goal, you have a higher risk tolerance. If you lose money, there’s time to make it up. You can invest aggressively and take a few chances. You can take a chance with DIY investing because there’s time to make up for any mistakes.

Shorter-term goals need a more structured portfolio with a distinct focus. A robo-advisor is better if you have a shorter timeline, and/or lower risk tolerance.

How much do you know about Robo-Advisors?

Choosing between an automated robo-advisor or DIY investing comes down to how much you know. The DIY route can be scary. You call all the shots. Fintech makes it easier to be a DIY investor by providing discount brokers (online brokers) but you are in control. The platform is where you make the trades, but you decide what you trade.

A robo-advisor does all this for you. It’s a great option for beginners or investors with little interest in the ins and outs of investing. If you’d rather set it and forget it, robo-advisors are right for you.

Which Robo-Advisor Option is Right for You?

There isn’t a one-size-fits-all approach. Look at the big picture. How much risk can you handle? What are you willing to pay? Do you want a say in what you invest in or would you rather transfer your money and let a fintech programme do the rest?

Look at all your options – today there are more than ever before. The best news is, though, you don’t need to pay the hefty commissions and fees human advisors charge. The barrier to entry is much lower for all investors, so there’s no reason to avoid investing today.

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