By Chris Brycki, Founder + CEO of Stockspot, Australia’s fastest-growing robo-advisor.
As you may have learned from the Carrots crew, saving up and building your wealth through investing in shares has historically been the best way to earn returns on your money over the long term.
The hard part is knowing 1) how to invest and 2) what to invest in.
But the meeting of tech + finance has fundamentally changed that.📱+💰
Enter robo-advice. It’s online personalised investment advice and portfolio management (maintaining your basket of investments). 👾
Robo-advisers will provide you with a portfolio made up of diverse components, based on your profile. That means you don’t have to worry about picking individual investments and figuring out how to build that basket yourself.
Beep beep cheap cheap
Robo-advice’s emergence has made investing easier, more accessible and a lot more affordable. In the past, you typically needed a minimum of $100,000 before a (human) advisor would let you in the door. 💰🚪
Robo-advisers use technology to automate a lot of the tasks a human financial advisor or fund manager do manually… and charge a lotta money for.
That includes profiling your ‘risk appetite’, or ‘rebalancing’ your portfolio (as different investments move in different ways). These can now be done automatically using algorithms. That means goodbye endless paperwork, ✋📑 and goodbye eye-watering costs.
Yes defs to ETFs
You may have heard of these through the grapevine (or through Carrots) 🍇. Instead of investing in one or two companies on the stock market like BHP or Myer, an ETF tracks an entire market, like the top 200 Australian companies or the largest 100 companies in the world.
You get exposure to lots of different markets + companies across the globe, which means a better-balanced portfolio ⚖.
You don’t need to pick individual stocks or try and time when it is best to buy and sell your shares! (Phew.)
Robo-advisers build portfolios from ETFs made up of investments in thousands of shares and bonds from Australia and the rest of the world.
Generally ETFs are preferred over ‘actively managed’ funds (which favour individual stocks over others) because they charge much lower fees and have generally delivered better returns. The less fees you pay, the more returns you keep! 👍
What should I watch out for?
- Getting a Statement of Advice (SOA) is important. A real robo-adviser will ask personal questions about your financial situation. If you don’t get an SOA, it’s not personalised investment advice. 📨
- If you have to step away from your device to talk to an adviser, it’s not robo-advice. 🗣
- Transparency is important. Robo-advice was borne out frustration at the biased advice traditional advisers gave clients. A lot of human financial advisers are paid to recommend certain financial products, whether they’re good for you…or not. 🤑
- A true robo-adviser does not take payments from the funds they recommend! Instead they invest independently — in what is likely to give you the best investment results for your situation. 💵
How do I get started?
It’s pretty simple. You can go online, answer some questions about your financial goals, investment time frame + attitude to risk. The robo-adviser will give you a Statement of Advice (SOA) and recommend an investment strategy. If you decide to invest, said robo-adviser will manage your portfolio and do the heavy lifting!
Thanks Chris! Carrots, like Stockspot, believe that it should be easy-as-pie to get on top of your money, including making investing accessible for more people.
P.S. We don’t get paid for any of these guest posts. They’re contributions from smart + good people whom we trust!