Table of Contents
Key points:
Automated investing: a robo advisor automatically invests your money for you based on your personal goals and risk appetite.
Low costs: Compared to traditional advisors, robo-advisors are often cheaper because they work digitally and without much human intervention.
Long-term performance: Robo-advisors often rely on so-called ETFs to invest your money in a broadly diversified way. This helps to reduce risk and achieve stable long-term returns.
Robo-advisors, the smart portfolio helpers - a simple explanation for beginners
The world of investing can sometimes seem complicated and confusing. But there is a modern solution that makes it easier for you to get started: the robo-advisor. These digital helpers take care of investing for you - simply, automatically and often at low cost.
But what exactly is a robo-advisor, how does it work and what advantages does it offer?
Plus: Which top providers already exist and can you earn money with them without any prior knowledge?
In this article you will find a brief explanation that will help you to better understand this financial tool and possibly use it for yourself!
What is a robo-advisor?
A robo-advisor is a digital investment advisor that uses computer algorithms to manage your money. Unlike a human advisor who gives you personalised recommendations, a robo-advisor is based on a predetermined strategy.
This strategy is tailored to you by the robo-advisor asking you about your needs and risk behaviour on the financial market. It then automatically invests your money in various investments such as shares and bonds.
How the investment assistant works
To begin with, you answer a few simple questions about your financial situation and your goals. These questions help the robo-advisor to determine your risk - i.e. how much risk you are prepared to take in order to potentially achieve higher profits.
Based on this, the robo-advisor creates a plan and invests your money in various investments. Many robo-advisors use ETFs (exchange-traded funds) for this, which allow your money to be broadly diversified. The robo-advisor then monitors your portfolio and automatically adjusts it if necessary.
Who are they suitable for?
Robo-advisors are ideal for people who have little experience with investments or don't have the time to devote to them. They offer an easy way to enter the market without having to be an expert yourself. Even if you already have some experience but are looking for a cost-effective and time-saving way to invest your money, robo-advisors can be a good choice.
Parents in particular can benefit from robo-advisors, as more and more providers of junior depots, i.e. portfolios for children, are relying on robo-advisors. This makes it easier for children to save profitably for their future goals.
Robo-Advisor costs: What you should know
The costs for a robo-advisor are generally lower than for traditional financial advisors. They are made up of a management fee and the costs for the ETFs used. The management fee is often between 0.25 % and 1 % per year, while the ETF costs are usually between 0.1 % and 0.5 % of the investment volume.
Despite these fees, robo-advisors are often cheaper than traditional asset managers.
Advantages
- Simplicity: You don't need to be an expert. The robo-advisor takes care of almost everything - from investing to monitoring.
- Low costs: As robo-advisors work digitally, the fees are often lower than those of traditional asset managers.
- Access to professional investment strategies: You benefit from strategies that are normally only available to larger investors.
- Automatic customisation: The robo-advisor regularly adjusts your portfolio to ensure it remains optimally set up.
Disadvantages
- Less personalised advice: In contrast to a human advisor, there is no direct contact person who can respond to your specific questions.
- No guarantees: As with all investments, there are risks involved. Losses are possible.
- Limited control: You relinquish control over individual investment decisions, as the robo-advisor acts automatically.
Robo-Advisors in comparison: Which providers are recommended?
If you are considering using a robo-advisor, it is worth comparing the providers. Here are some recommended robo-advisors that we have already tested:
- Scientifically sound investment strategies
- Environmentally friendly investments
- No maturity limit
- Very low costs
- Fast online opening
- Investing in global ETFs
- Good risk management
- Profit through compound interest
- Large selection of different investment strategies
- Automatic utilisation of the exemption order
→ Suitable for: Long-term investments
→ Suitable for: Cost-conscious investors
→ Suitable for: Risk-conscious investors
These providers offer different advantages, so you can be sure to find the right robo-advisor for your needs.
Robo-Advisors and ETFs: Simple but effective performance
Many robo-advisors invest in ETFs.
ETFs are like baskets that contain many different stocks or bonds. This means that your money is broadly diversified, which reduces risk. This type of investment is particularly simple and effective, as ETFs can keep costs low while offering good performance.
Are robo-advisors useful?
Whether a robo-advisor makes sense for you depends on your goals and risk appetite. If you are looking for a straightforward, cost-effective and automated solution to invest your money, robo-advisors are a good choice.
However, it is important that you are aware that there are risks involved and that returns can fluctuate.
Conclusion: Robo advisors as a simple investment solution for everyone
Robo-advisors therefore offer a practical way to invest your money without having to familiarise yourself with the subject matter. They are particularly suitable for beginners, parents and people looking for a simple and cost-effective investment solution.
If you want to take a long-term approach and have your money managed automatically, a robo-advisor can be a good choice.
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