Step 4 Utilize a Robo-Advisor for Investment Management: 5 Ways to Simplify Your Financial Life

Our personal finances- budget, investments, retirement, insurances, credit, etc.- are one of the leading causes of stress among adults. School systems only recently started offering personal finance courses to high school students within the last 5 years, and it is not yet a leading standard of education throughout the nation. But it is something that every adult must navigate, and it deeply affects our quality of life day today. This leads to large amounts of confusion, which results in higher taxes, significant loss of potential investment returns, lost cash flows not being put to good use, and even poor credit scores. Amid financial confusion, making small changes can have a big impact on your overall financial health. Here are 5 basic steps to simplifying your financial life:

4: Utilize a Robo-Advisor to Optimize Your Investment Management

I want to reiterate this point: NOBODY TEACHES THIS STUFF. So when it comes to investing, many folks feel blind. We read ‘investing for dummies’ books or talk to our friend who doesn’t have any credentials but thinks they have it figured out. Ultimately we try to do it ourselves. Study after study shows that normal consumers trying to go it alone make subtle, yet costly mistakes to their investments. It could be from investing in vehicles that are not tax-efficient, leading to unnecessary income or capital gains taxation. It could be from poor investment allocation leading to costly losses. It could be from taking too much risk or not enough risk so as to give ourselves a heart attack or not achieve our goals. Regardless of what the mistakes are, we see that we need help when it comes to investing.

Many people seek help in the form of financial advisors, but many advisors (unfortunately) have high minimum asset requirements to work with them. They require you to have a certain amount of money before it is worth their time. Additionally (and equally as unfortunately) many are not fiduciaries and are paid based on the financial products they sell, so they could put you in an investment that is still not in your best interest. (I want to caveat these last couple sentences with the fact that there are many wonderful financial planners that really care to serve their client’s best interests. I just caution investors to do their research).

This issue has become widely known and out of it was birthed the Robo-Advisor. This is a tool, where you can put your money, answer some questions as far as your risk tolerance, how long until you need the money, your goals, etc and it will invest for you. Most of these tools have performed very well. Through the technology inside these Robo-advisors, your money will be properly diversified by creating an optimal investment strategy and rebalanced when some investments have gone up and others have gone down, to make sure the risk/return metrics are maintained. Robo-Advisors allow you to invest your money well, without taking the risk to do it yourself, or without paying costly commissions to a financial advisor.