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What is a Robo Advisor?
A Robo advisor is an investing service which relies on algorithms to build a portfolio for you based on your risk tolerance and investment time horizon. There are no individual humans picking the funds for you, so there is lower cost, and its very easy to use for beginner investors. The service will create a portfolio for you, so you don’t need to pick stocks, just contribute to the fund, and invest regularly.
What does a Robo Advisor offer?
You can invest in an RRSP, TFSA, or taxable investment account with a robo advisor. The choice is yours.
Robo advisors are often provided by companies that offer multiple types of services. For instance Wealthsimple offers Debit accounts, high interest savings accounts, RRSP, TFSA, RESP, a fee free self directed investing platform, and also have a crypto trading platform. Their Roboadvisor service is called Wealthsimple Invest (you can get your first 10k managed for free by using this link), the self directed service is called Wealthsimple Trade (Get 2 free stocks when you sign up using this link).
Another well known company offering both robo advisor services and self directed options is Questrade. Their Robo Advisor service is called Questwealth portfolios.
Save investment fees
Roboadvisor options are becoming more popular these days for people who prefer not to have actively managed investments and pay the subsequent fees that come along with humans closely managing their money. These services rely more on algorithms to direct your investing. The fees are relatively low cost, compared to mututal funds, and that can mean a whole lot more money in your account at the end of the day.
I have been using Wealthsimple almost since they started due to their good rates on their High Interest Savings Account and began with Wealthsimple Invest for RRSP, and Trade when it launched to build a stock portfolio under my TFSA account.
Humans work at robo advisors too
Surprisingly the other day I received an email from an investment specialist. Surprise…humans actually work at Roboadvisors! I set up a call with her to see what it was all about.
#1 She didn’t try to sell me anything. WIN!
#2 She helped me think about the risk level of my various investments vs what the goal for those investments were. Thinking about long term vs short term investments and risks. Likely will readjust the long term to slightly higher risk exposure due to my time horizon till use (retirement).
#3 We talked about what should be in a HISA vs investment (TFSA or RRSP) depending on the savings goals we have. Where things like an emergency fund should be placed.
All in all it was a win and further reinforced my appreciation for Wealthsimple.
Have you used Roboadvisors before? What has your experience been like so far?
For more blog posts like this, check the Finance and Investing of the blog!