Investing Your Money with Robo-Advisors

If you are thinking of investing your money but are unsure of committing a large sum or engaging a financial advisor, how about logging on to a robo-advisor?

By Wong Yee Fong       30 October 2020

MAS Regulated

With increasing accessibility to such fintech avenues also comes the need for regulations. The Monetary Authority of Singapore requires robo-advisors to be licensed under the Securities and Futures Act and/or the Financial Advisers Act.

Choosing Your Robo-Advisor

Choosing a suitable robo-advisor may be daunting when you are just starting out and faced with so many choices in the market. You can narrow down your options. Start by asking yourself what you want to achieve.

1. Define your goal and decide how much you are willing to commit. Are you planning for a big holiday, furthering your education, or something long term such as retirement? Setting a goal will give you direction and help determine your budget.

2. Compare the fees and minimum investments required by various robo-advisors. Are there other costs, such as transaction fees, on top of the monthly or management fees? As mentioned earlier in this article, robo-advisor fees are structured differently. Always revisit your goal and study each service carefully. Don’t be lured into committing more than you should for the prospect of (but not guaranteed) higher returns.

3. Consider each robo-advisor’s specialty. Many robo-advisors invest mainly in ETFs, with additional specialty areas such as funds and individual stocks. Yet others may focus on sectors such as insurance and healthcare. You may evaluate your preference based on your risk tolerance level, your knowledge of the sector, or even your social values.

Managing Your Robo-Advisor

Even though you have signed up with a robo-advisor, you should not switch to auto-cruising mode from there.

1. Do your due diligence. Bear in mind that robo-advisors are driven by algorithms and do not always provide the context under which the decisions are made. You should do your due diligence by understanding the portfolio that has been created for you.

2. Monitor your investments. Do this regularly and adjust them as you progress in your career, when your life circumstances change, or when there are sudden changes in market conditions.

While employing robo-advisors may sound like an affordable and convenient instrument to grow your savings, they are by no means fortune-tellers. They can’t address your anguish during a significant market drop or egg you on when market conditions are favourable.

The decision on weathering a storm or taking the plunge still lies in your hands.


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