BEN­E­FIT FROM A TAI­LORED PORT­FO­LIO

The National - News - - BUSINESS MONEY - Stian Over­dahl

Robo-ad­vis­ers use an on­line sign-up process to gauge an in­vestor’s risk tol­er­ance by feed­ing in­for­ma­tion such as their age, in­come, sav­ing goals and in­vest­ment his­tory into an al­go­rithm, which then as­signs them an in­vest­ment port­fo­lio, rang­ing from con­ser­va­tive to higher-risk ones.

These port­fo­lios are made up of ETFs with ex­po­sure to in­dices such as US and global equities, fixed-in­come prod­ucts such as bonds, though ex­po­sure to real es­tate, com­modi­ties or gold is also pos­si­ble. In­vest­ing in ETFs al­lows robo-ad­vis­ers to of­fer fees far lower than tra­di­tional in­vest­ments, such as ac­tively man­aged mu­tual funds bought through a bank or bro­ker.

In­vestors can buy ETFs di­rectly via a bro­ker­age, but with robo-ad­vis­ers they ben­e­fit from port­fo­lios matched to their risk tol­er­ance as well as be­ing user friendly. Many robo-ad­vis­ers charge what are called wrap fees; there are no ad­di­tional fees such as sub­scrip­tion or with­drawal fees, or fees for re­bal­anc­ing.

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