The Good and Bad of Robo-Advisors
(Photo : The Good and Bad of Robo-Advisors)

Even if all your company's technical and marketing chores, like docker monitoring, cyber security, SEO strategies and database maintenance are in competent hands, the time will come when owners face challenges unrelated to daily operations. That day will arrive when there is too much cash in the company account and you'll need to develop and investment strategy for making use of idle funds.

More and more companies are turning to robo-advisors (RAs) for low-cost help with investments. RAs are online bots that help you choose from a menu of appropriate investments based on data you provide. With minimal human interaction, any company owner can set up a functioning RA that delivers good investment results year after year, at a much lower fee that an in-person broker would charge. 

Full-time brokers can be pricey, and constant monitoring of company investment accounts can eat into the valuable time managers need for core business tasks. Robo-advisors solve this problem. Here are the primary advantages of using a robo-advisor for your company's investments:

Emotions Don't Get in the Way

RAs are excellent at leaving emotions out of the equation. Robots are like that. Ask any seasoned stock trader and they'll be glad to tell you of their biggest wins and losses. The majority of losses are due to emotion-based trading. RAs eliminate this huge investing pitfall completely. Buy and sell decisions are made based on raw numbers and parameters that you feed into the system when you first sign up for an account. If you want to change the criteria, you can, but robo-trading tends to be a set-it-and-forget-it type of affair.

Price

Compared to human brokers and fund managers who charge about 2 percent of assets under management, RAs come with a fee of about half that. You even get to speak with a human a few times each quarter if you have technical questions or just feel the urge to jaw-bone with a real live person.

No Tax Headaches

For many, the shining glory of RAs is their ability to minimize taxes for investors. The bots know how to automatically switch holdings and maintain a few that are able to offset taxable gains that accumulate over time. In addition to this so-called "tax harvesting" technique, RAs also deliver slick, no-frills tax statements to you at least four times per year that give you exactly what you need for federal and state filings.

Portfolio Choices

When you sign up with an investment account that has an RA as the main trader, you'll have plenty of choices in terms of stocks, bonds, ETFs and the like. Depending on the brokerage you go with, the initial questionnaire will help you find investments that fit your risk style and budget.

Automatic Rebalancing

Periodically, RAs are able to rebalance your entire portfolio so that it matches your original intent. This is a necessary step because some assets earn more than others, or lose more than others, causing the portfolio to get out of whack every few months. Automatic rebalancing is one of the big selling points for brokers who offer RA services to clients. 

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