- Robo advisors make it easy to invest in the market
- However, they are not suitable for everyone
- Here, find out if you should really consult a robo advisor or not
Robo Advisors in India make it easy to invest in the market. However, are they meant for everyone? Will robo advisors able to guide the client in the right direction as per the prevailing market conditions? Can they replace financial advisors? To find the answers, let’s first understand what robo advisory is.
What is Robo Advisory?
A robo-advisor is an algorithm based financial services which are offered online with little or no human involvement. These algorithms collect useful information from investors like age, financial goals, etc.; and impart investment-based advice. There is a certain mathematical equation that offers ‘customised’ investment advice on the basis of what your risk profile is along with other useful factors.
Who Should Take Advice FromRobo Advisors In India?
Usually, it is said that robo advisory is low-cost and therefore, it is well-suited to investors with low asset size. On the other hand, financial advisors believe that those investors who have a thorough understanding of the market along with the investment risks should avail services of robo advisors in India.
It means do-it-yourself investors who have ample time to review their financial portfolios are apt for robo advisory. Such investors are usually aware of the risks which may arise,and they have a better idea of where they should invest money to accomplish their financial goals.
Is Any Drawback Attached to Robo Advisory?
Thoughrobo advisors make it easy to invest in the market; they might not give you complete advice. In a booming market, a risk-averse investor might be interested in investing in equities. On the other hand, the same investor might not be able to bear losses when the market falls. As a result, a robo advisor might not be able to know that whether the investor is keen to take risks as the stock markets are doing well or does he able to bear losses when the market crashes.
An investor might miss human touch, which is needed to understand the entire purpose and for which a person is investing. At times, a person might not be comfortable in investing in equities. During this time, some hand-holding is required to help the person understand that why he should invest in the market. Similarly, motivation is needed to encourage the investor to stay invested.
However, what happens in a robo advisory is that a person needs to enter basic details like goals, income, expenses, etc. Once the information is submitted, a robo advisor will show some numbers which tells a person how much he/she is required to save every month/ year to achieve goals.
Here the numbers given by robo advisor might tell the investor how much he needs to save but these big numbers might not be enough to encourage them to start investing.
Financial planning is a complex process which not only involves investing but other aspects as well, like estate planning, insurance, tax, etc. Though a robo advisor may get you started; it may not cover other aspects of financial planning.
Now, Can Robo Advisors Replace Financial Planners?
Whether you are a newbie or an experienced investor, you may require help at certain points of your time. Moreover, it has been seen that most of the people start investing with zeal but fail to keep up the pace with time. Here, a financial planner can help you. A financial planner can devise a financial chart for you and also motivate you to start investing (and continue investing) to achieve your goals.
However, a financial planner can help you only if he does his job honestly and stays away from pushing one product over another for his personal interest.
If you think you have enough knowledge and time to follow the market, go with robo advisors in India. They can be a good option if you use it correctly.
Most importantly, whether you are using robo advisor or financial advisor, invest only after understanding the market and product carefully.