Are Robots the Future of Investing?
They always said it would come. A time when the robots would take over everything from cleaning our homes to running our lives. While the wildest predictions are yet to come true and AI still has a long way to go before we get a computer that can think for itself, there are countless areas in which automated processes are taking over from ones which need direct human involvement.
One particular area that has come into sharp focus recently has been that of investing with the rise and rise of so-called robo-advisors.
Essentially, these are computer programs driven by a series of algorithms that can make investment choices and decisions in an ongoing process. The way that they work is reasonably simple. The investor answers the same sort of questionnaire that a financial advisor might bring along to an initial meeting. This will include questions about financial objectives, amounts to be invested and the individual’s attitude to risk.
Once all the information has been inputted, the algorithms behind the program get to work on devising the investment strategy and allocation of funds to create a balanced portfolio. It then continues to make adjustments as market conditions change to maintain the balance as specified at the outset.
Investments tend to be in bonds and funds instead of individual stocks and shares. However, many people want to be able to pick and choose which individual shares to invest in. While robo-advisors tend not no offer this focused level of service, there is online help avilable through sites like buyshares. This provides a direct connection to online brokers as well as offering a wealth of practical guidance and advice for the novice investor. This includes a comprehensive guide to choosing and buying shares, an explanation of dividend payments and even links to recommended trading platforms.
Lower Fees, More to Invest
What this manages to achieve, in both cases, is that the fees for using the services tend to be far lower than one would ever find in situations in which independent financial advisers or stockbrokers were being used. This is a particularly relevant consideration for investors without huge amounts of money to invest as, obviously, the less spent on fees and the more that can be used in the pursuit of growth, the better.
The fact that robo-advisors are especially appealing to novice investors and those with limited resources is useful because they are best suited to creating and running simple strategies focussed on a few areas of investment.
For more complex requirements, where there are number of different assets and investment ambitions to be achieved, the input of a financial adviser is more important. It also provides the reassurance that an individual’s future wealth isn’t simply being left at the mercy of an algorithm.
It’s very likely, however, that as technology progresses robo-investing platforms will become more and more nuanced and sophisticated. So, while they may primarily be for entry-level investors today, who is to say that before very long they won’t be able to work as well as their human counterparts? As with so many things, only time will tell.
Suzie Dean has worked as a journalist and in for production for many years. She is from Manchester, UK and enjoys the ever changing and exciting work the media industry has to offer. – Freelance writer. This article has been published in accordance with Socialnomics’s disclosure policy.