Robo advisors are completely changing the investing and trading industry; these robo advisors have been successfully replacing financial advisors over the years. This is evident from the huge growth in assets under management.
According to Statista, assets under management in the Robo-Advisors segment are standing around $980.5 billion by the end of fiscal 2018. In addition, assets under management of these robo advisors are likely to grow at an annual rate of 27% in the following four years.
With the help of complex algorithms, Robo-advisors have successfully outperformed the returns of a broader market index in the past couple of years.
Indeed, the returns from robo advisors remain strong during the turbulent periods. This represents that these algorithm techniques work quite well during both bullish and bearish trends. According to the Robo Report based on the three-year performance, the average return from robo advisors stood around 6%.
The investments and portfolio management from Robo-advisors are 100 percent analysis driven; their decisions do not rely on market speculations and emotions.
Besides higher returns and the enormous growth in the industry, these advisors are offering several benefits to investors compared to human advisors or other trading platforms.
Tax Loss Harvesting
The majority of robo advisors offer Tax loss harvesting feature. This feature allows investors to reduce taxes and maximize gains without the involvement of a third party and an additional fee. What is Tax loss harvesting? Many robo-advisors sell losing investments and replace them with others, to offset gains and reduce your tax bill.
Portfolio rebalancing is significantly important when it comes to investing in volatile stock markets. Robo advisors generally offer portfolio rebalancing services to investors to reduce the risk of market uncertainties on their investments. If the markets form a bullish or bearish trend, the investor doesn’t have to work out how to adjust your portfolio; the robo advisor will automatically do that adjustment for you.