What is a Robo Advisor and How Does It Work?

robo-advisor

A Robo Advisor is an automatic investment service in mutual funds. It is managed through algorithms and computer programs that collect the money you send, and it is invested for you automatically. So, you don’t have to worry about choosing which assets to invest in or performing operations. Your investments will be made automatically through robo-advisor.

We are not facing any artificial intelligence, but the guidelines that govern these automatic managers have been set by the professionals who work in investment banks.

Robo advisors offer a personalized investment fund portfolio for each client. Depending on the profile of the person, the portfolio is made up of different funds that invest in different assets, for example, fixed income, stocks, real assets, etc. Also, each fund’s percentage in the portfolio is also different for each client and is automatically set according to the profile.

How to Create the Investment Portfolio in A Robo Advisor?

To find out which investment is the most suitable for you, you are asked to take a questionnaire on the Robo Advisor website. Your investor profile is formed through their questions, including information such as your age, income, attitude to risk, etc. Depending on your profile, you will be offered a series of investment fund portfolios so that you can choose one of them and start investing.

Once you have chosen an investment portfolio, according to the Robo Advisor’s recommendation, it will invest in the funds that make up the portfolio as you send money, distributing the capital and maintaining the proportions of each fund concerning the total. This process is automatic, and you have no control over how your portfolio is distributed. The Robo Advisor controls this process, not you.

As the portfolio is built according to your investment profile, no changes can be made to its composition. If you want to change your investing, you will have to change your portfolio.

Final Words

Thus, these stepsimply creating a new investor profile so that you are offered new options.