By Henrike Hein, Feb. 11, 2023
What is a Robo-advisor, what are the pros and cons?
Are robo-advisors dull robots and can they be trusted to invest money?
Robo-advisors are actually automated asset managers. They work according to standardized procedures and predefined algorithms, they make automatic recommendations for investments and can also implement them. They thus offer the possibility of managing portfolios cheaply and effectively and conveniently from home without having to go to the bank.
Automated and still individual …
Robo-advisors offer several advantages:
- Personal investment strategy: The investor's investment objectives, sustainability preferences, risk appetite, wealth of experience and financial situation are all taken into account. On this basis, an appropriate portfolio is proposed. If the customer agrees with the investment proposal, a securities account is opened and the investment strategy is implemented.
- Algorithm-based portfolio management: In the investment period, the robo-advisor (in most cases) acts without prior coordination based on automated calculations.
- Data-based: The robo-advisor acts rationally based on data and calculations and human errors of judgment are thus minimized.
- Reasonable price: Due to the automated process, the investments are usually cheaper than funds put together manually by portfolio managers („actively managed“).
- Digital: Most offers are provided online and can be accessed without active consultation.
If you invest in ETFs, you don't need a robo-advisor.
When choosing a robo-advisor, it's worth taking a closer look and paying attention to the following:
- Equity portfolios: However, of the 30 or so robo-advisors in Germany, only three invest in individual shares. The rest, in turn, invest in ETFs, funds and bonds that are not consistently sustainable. The robo-advisor thus forms mixtures of mixtures. However, these cannot be optimally combined as a result. In addition, most funds and ETFs are already highly diversified individually – so you don't necessarily need a robo-advisor to put them together.
- Minimum deposits: Many providers require sometimes very high minimum deposits.
- Sustainability: Robo-advisors that invest in ETFs, for example, are not consistently sustainable because ETFs are usually not consistently sustainable, as we have highlighted elsewhere. The robo-advisors that invest in individual stocks hardly offer any sustainable investment options.
Shares for all!
Robo advisors are digitizing asset management and lowering the entry barrier for private investors to their own individual portfolios. The broader accessibility thus democratizes the stock market. Our goal is to make the financial market greener and more diverse. That is why we have developed our own Robo-Advisor, which develops risk-return optimized portfolios of individual stocks with a consistent sustainability claim.
Only sustainable stocks are included in Goldmarie Finanzen's portfolios in order to create an optimized portfolio. Investors thus benefit from the advantages of individual shares, i.e. high returns, transparency and participation, and from the advantages of funds in terms of diversification and risk minimization.