More people seem to be aware of the potential utility that a reverse mortgage could provide for older homeowners, including as a tool to age in place and to provide greater cash flow in retirement. This is according to survey results published this week by WSFS Mortgage, a division of WSFS Bank.
“[M]ost homeowners with knowledge of reverse mortgages agree they can allow you to stay in your home longer (79%) and provide needed cash flow (76%) in retirement,” the results explained. “Sixty-two percent of respondents with knowledge of reverse mortgages agreed they can provide more financial freedom in retirement, while 61% said they can help cover expenses like long-term care.”
The survey was conducted nationally by research company Opinium in late February, and it consisted of 750 homeowners age 60 or older. It measured “respondents’ financial stability, knowledge and attitudes toward reverse mortgages,” the results stated.
As a product primarily offered by the Federal Housing Administration (FHA) that has undergone a series of major changes over the past 15 years in particular, robust investments in borrower education could indicate that there is more awareness of the different uses that a reverse mortgage can offer, according to Jeffrey Ruben, president of WSFS Mortgage.
“Reverse mortgages have undergone significant changes the past decade, but the biggest change is how many financial advisors are now incorporating housing wealth into their retirement income planning,” Ruben said in a news release. “A reverse mortgage could be a good option for those seeking to strengthen their cash flow in retirement.”
Nearly 30% of respondents indicated openness to incorporating a reverse mortgage into a larger retirement plan, the results said.
“For many Americans, their house is their largest asset, but it can also be your largest liability in the sense of cash outflow each month,” Jamie Hopkins, SVP and director of private wealth management of Bryn Mawr Trust, said in the release. “Your home comes with a lot of costs, like mortgage payments, utilities, property taxes, and more, which can really impact retirement planning. Housing, wealth and retirement is more about cash flow, and can you maintain that cash flow and your property while living the life you want in retirement.”
Thirty-four percent of respondents said “they would probably (21%) or definitely consider (13%) a reverse mortgage if it was relevant to their financial situation,” the results showed.
During the survey and after learning more about potential use cases of the product, 16% of respondents said they were “very knowledgeable about reverse mortgages,” 26% said they “were moderately knowledgeable” and 22% were “slightly knowledgeable,” and said they might be more likely to engage with the product. This compared to 17% who said they “were not knowledgeable about reverse mortgages,” the results explained.
Borrower education and spreading awareness of the product category has been a key priority for most major reverse mortgage industry players for years.
“We know that we’ve got to do a better job of educating our customers, and that education continues to be a barrier, but that’s not a problem that’s solved overnight,” Chris Moschner, chief marketing officer of Finance of America Companies said in a late 2023 interview.
“That’s a problem that’s solved with content, with influencers, PR, marketing, advertising and messaging. There are multiple ways that’s done, and it just takes time, money and commitment.”
Personal Capital is a client-centric robo-advisor offering investment and wealth management services. The company distinguishes itself from the competition by combining automation with personal service. With over 2.7 million users, Personal Capital currently holds $16 billion in assets under management.
Unlike many financial apps designed to make investing more accessible, Personal Capital is a robo-advisor for those who already have some established wealth. They’ve gone back and forth on the minimum investment required, which is now set at $100,000.
Get started with Personal Capital
on Personal Capital’s secure website
Its goal is to provide a more transparent and affordable investment platform. However, its wealth management service does target clients with larger assets, with higher fees being assessed with the fewer assets you let the company manage.
In this Personal Capital review, we’ll get into the specifics shortly, but the upside to potentially paying higher fees is the access you get to financial advisors to help with your investment strategy.
The company utilizes five principles for investing:
the modern portfolio theory
personalized asset allocation
tax optimization
equal sector and style weighting
disciplined rebalancing
No matter how much in assets you’re looking to invest, consider Personal Capital if you prefer a hands-on experience or if you have a large portfolio to open or transfer. Either way, we’ll take you step-by-step through the different types of accounts you can have with Personal Capital, as well as the fees you’ll pay at different asset levels.
You’ll also learn about the special features that make Personal Capital unique, including financial tools and expertise. If you’re looking for an online advisor for any or all of your wealth management, see if Personal Capital is right for you.
Available Plans at Personal Capital
There are three different plans available at Personal Capital, which are divided up based on the amount of investable assets you have. If you know how much you’d like to invest, find the correct category to learn about the benefits and services you’d receive from Personal Capital. Then keep reading to learn more about the fee structure.
Investment Service Plan
The first plan is targeted for those with up to $200,000 in assets to be invested. Services include access to a financial advisory team, a tax-efficient ETF portfolio, dynamic tactical weighting, 401k advice, and cash flow & spending insights.
You’ll also get to use Personal Capital’s free wealth management tools. You do, however, need a minimum of $100,000 to get started investing with Personal Capital.
Wealth Management Plan
The next option is the Wealth Management plan, for those with investable assets between $200,000 and $1 million. You get access to all the benefits from the Investment Service plan, plus several others.
The Wealth Management service includes two dedicated financial advisors, customizable stocks and ETFs, a full financial and retirement plan, college savings and 529 planning, tax-loss harvesting and tax location, and financial decisions support.
The financial decisions support refers to help with insurance, home financing, stock options, and compensation. Also, note while your financial advisors can help you plan for investment accounts like a 401k for retirement or a 529 for college savings, Personal Capital doesn’t actually offer these accounts.
Private Client Plan
If you invest more than $1 million, you qualify for the Private Client Plan. Again, you receive all the perks of the previous two plans, in addition to several more.
To begin, you’ll get priority access to CFP, financial advisors, investment committee, and support, plus an investment portfolio mix of ETFs, individual stocks, and individual bonds (in certain situations).
You also receive family tiered billing; private banking services; estate, tax, and legacy portfolio construction; and donor-advised funds. Personal Capital also offers private clients a private equity and hedge fund review, deferred compensation strategy, as well as estate attorney and CPA collaboration.
Get started with Personal Capital
on Personal Capital’s secure website
Fee Structure and Accounts
The more money you invest through Personal Capital, the more money you’ll save in fees. If you invest up to $1 million, your fee comes to 0.89% of the assets being managed. If you invest more than $1 million, your first $3 million in assets are only charged a 0.79% fee. Then, your next $2 million is charged 0.69%.
The $5 million after that are charged 0.59% and the next $10 million are charged 0.49%. However, there aren’t any charged beyond the account management fees, so you don’t have to worry about annual, transfer, or closing fees.
So what types of investment accounts are supported through Personal Capital? There are many: both individual and joint non-retirement counts; Roth, traditional, SEP, and rollover IRAs; and trusts.
Through your Personal Capital investments, you can expect a healthy range in your portfolio. For example, when buying U.S. equities, they buy a diversified sample of at least 70 individual stocks that epitomize their tactical weighting approach and optimize your account for tax purposes.
Personal Capital also only purchases liquid securities, so that if you ever need to access cash quickly, you can receive funds within a settlement period of just one to three days.
Funds are held by Pershing Advisor Solutions, a Bank of New York Mellon Company. It is one of the largest U.S. custodians and currently holds more than a trillion dollars in global client assets.
Tax Optimization Strategies
Personal Capital uses several techniques and strategies to ensure clients are optimizing their taxes on investments. First, they entirely avoid mutual funds, which they regard as inefficient for tax purposes. Their asset location is personalized whether you have taxable accounts or retirement accounts.
For example, Personal Capital typically places high-yielding accounts and fixed income into a tax-deferred or exempt account. REITs are also generally placed in a retirement account because they pay nonqualified dividends.
Finally, Personal Capital utilizes tax-loss harvesting, meaning they use individual securities that realize losses and can, therefore, offset gains or provide a tax deduction.
Special Features
You can take advantage of some of Personal Capital’s online resources without even becoming a client. Just by creating a Personal Capital account, you can link all of your financial accounts for an investment checkup.
The program analyzes your bank accounts, credit cards, and investments to create recommendations on your asset allocations. You can then choose whether to make those adjustments to your investments.
Additionally, you can check holistically on how your investments are performing by considering how much you’re charged in fees. You can do this in one of two ways.
The first is through the Mutual Fund Analyzer, which you can compare performance (with fees) against the broader markets. Then you can use the general Fee Analyzer to see what you’re being charged on your non-taxable retirement accounts.
You can also use Personal Capital for a budget check-up that analyzes your saving and spending. You can even incorporate their Retirement Planner for long-term savings projections.
You’ll be provided with several scenarios, including best-case, worst-case, and most likely. It gives you a good idea of what you could potentially expect when you’re finally ready to retire.
All of these features run through the Personal Capital financial dashboard, so you can get a holistic view of your entire financial picture. You can use them on their mobile app or website.
Some of their investment management tools include a 401(k) Analyzer, Retirement Planner, Investment Checkup, Net Worth Calculator. Moreover, you still have the ability to contact a personal financial advisor.
As we mentioned earlier, Personal Capital implements five distinct strategies for investing. Learn a bit more about each one to get a better grasp of how your money would be managed by this advisor.
Modern Portfolio Theory
The prime directive here is to create an efficient portfolio for clients while yielding the highest possible return for the lowest possible risk.
Personal Capital works with six asset classes to provide this equilibrium, which are all meant to be liquid and broadly investible. These asset classes are U.S. stocks and bonds, international stocks and bonds, alternatives (including ETFs and commodities), and cash for liquidity.
Personalized Asset Allocation
There’s a reason the company is called Personal Capital: they understand that no two investors are exactly alike. That’s why they look at your individual data and financial goals to balance your portfolio’s risk and growth.
They use a proprietary Retirement Planner software that analyzes your spending and savings habits in addition to your projected income. This helps you determine what your financial future looks like and what you may need to change to reach your future goals.
Tax Optimization
We mentioned earlier that Personal Capital optimizes your taxes by using tax-loss harvesting and asset location, as well as avoiding mutual funds.
In fact, these steps could boost your annual returns by as much as 1%. While many financial advisors use one or two of these tactics, Personal Capital offers a truly robust strategy to make your portfolio more tax efficient.
Equal Sector and Style Weighting
Personal Capital’s strategy for diversification involves equalizing the composition of your portfolio by sector, size, and style.
The goal is to prevent bubbles and other volatile conditions from adversely affecting your investments too much. Likewise, they don’t rely on a few large companies, but instead spread out U.S. stock investments between 70 and 100 different stocks.
Disciplined Rebalancing
Your portfolio receives a daily review for any potential rebalancing needs. For high-level assets, they’re typically rebalanced when they deviate more than a few percentage points from the target.
Specific securities receive a smaller margin and are reviewed after just a 0.5% move from the target. Having a systematic review allows you to maximize your ability to buy low and sell high.
Who is Personal Capital best for?
Personal Capital offers truly extensive services for high net worth investors, particularly considering the low percentage of fees charged. This is especially true if you’re an investor with several million dollars in assets and who likes to have easy access to a dedicated financial advisory.
After all, in the Private Client tier of $1 million+, you can get advice on just about anything related to your finances, whether it’s about retirement, real estate, or anything in between.
That’s on top of the personalized asset management, so you have a one-stop-shop of both automated algorithms and a human point of contact who understands the larger picture concerning your finances.
Personal Capital also makes it easy for this type of investor to remain passive. If you appreciate their investment management and like how the allocation and review processes, then you don’t have to do much on your own.
After making headlines throughout 2023, artificial intelligence looks set to remain a dominant technology theme, with many mortgage professionals looking at how to make it work for them this year.
But new technology trends also cause disruption, particularly when they lead to potential job loss. And the rise of generative AI continues to raise as many questions as it does answers regarding accuracy and fairness.
While opinions about where AI tools fit across the financial services landscape vary depending on the industry, common themes are also emerging over the benefits and risks, according to a report released this week by Arizent, parent company of National Mortgage News. In the research, Arizent surveyed professionals across eight different financial segments: banking, insurance, mortgage, wealth management, municipal bonds, accounting and technology.
Comments from mortgage respondents ran the gamut from “I don’t see AI as being for the greater good” to “The uses for AI in the industry are infinite.”
Here are a few findings from the survey results looking at how mortgage businesses are approaching the growth of AI.
Amidst a backdrop of inflation, rising borrowing costs, and growing debt levels, employee financial wellness has been on the decline in recent years. According to PwC’s 2023 Employee Financial Wellness Survey, a full 60% of full-time employees are stressed about their finances. Indeed, employees are even more concerned about their finances today than during the height of the pandemic.
Given that money worries can take a toll on employee health and well-being, as well as productivity at work, it makes sense that a growing number of employers are enhancing support for financial wellness. Bank of America’s 2023 Workplace Benefits Report found that 97% of employers now feel responsible for employee financial wellness (up from 95% in 2021, and from 41% in 2013).
Regardless of how well-compensated your staff may be, this type of resource can help workers feel more financially confident and prepared for the future. Here’s a look at 10 reasons why adding this benefit is so important.
1. Decreases Distractions and Increases Productivity
According to PwC’s Survey (which included 3,638 full-time employed adults across a variety of industries), financially stressed employees tend to be more distracted and less engaged while at work. The study found that financial stress and money worries had a negative impact on the respondents’ sleep, mental health, self-esteem, physical health, and personal relationships. Nearly one-third of employees surveyed admitted that financial insecurity has negatively impacted their productivity at work.
When employees are able to easily get answers to their financial questions and access on-site support when dealing with money problems, there’s a good chance they’ll be less stressed about their finances and more able to focus on their jobs. That’s a win for both employees and employers.
2. Improves Employee Physical Health
Financial stressors have been found to correlate directly with not only mental health challenges but also with poor physical well-being. As the American Psychological Association points out in their Stress in America 2023 report, stress and anxiety put the body on high alert and ongoing stress can accumulate, causing inflammation, wearing on the immune system, and increasing the risk of a number of different ailments, including digestive issues, heart disease, weight gain, and stroke.
Providing your employees with the support they need now can go a long way toward staving off physical health challenges down the line.
3. Builds Loyalty
By offering financial wellness programs, employers demonstrate a commitment to their employees’ well-being, which can help foster employee loyalty and increase retention rates.
The PwC study found that just 54% of financially stressed employees felt there was a promising future for them at their employer, and they were twice as likely to be looking for a new job than employees who were less stressed about their personal finances. What’s more, 73% of financially stressed employees said they would be attracted to another employer that cares more about their financial well-being compared to just 54% of non-financially stressed employees.
Recommended: 3 Ways to Support Your Employees During Times of Uncertainty
4. Can Help Reduce the Burden of Student Debt
Employees struggling to pay down student debt often have difficulty contributing to 401(k) plans and achieving other financial goals, such as buying a house or car. By offering student loan repayment benefits and education, employers can reduce this burden and help employees plan for the future.
The good news is that these programs recently became more affordable. Under the Coronavirus Aid, Relief and Economic Security (CARES) Act, employers can now provide $5,250 tax-exempt annually for an employee’s student loan repayment through 2025. That means employees won’t pay income tax on contributions made by their employers toward educational assistance programs, yet the employer also gets a payroll tax exclusion on these funds.
A growing number of employers are offering some form of loan repayment support. In 2021, only 17% of companies offered any of these benefits. In October 2023, 34% of employers offered student loan benefits.
Recommended: How Student Loan Benefits Can Help Retain Employees
5. Employees Want It
According to the PwC study, the vast majority of employees want help with their finances. Not only that, the stigma around getting help with finances appears to be lifting. In 2023, employees overall were less likely to be embarrassed to ask for guidance or advice about their finances than they’ve been in the past: Just 33% said they find it embarrassing, compared to 42% in PwC’s 2019 survey.
In Bank of America’s Workplace Benefits Report (which surveyed more than 1,300 employees and nearly 800 employers), 76% of employees said they felt that employers are responsible for their financial wellness.
6. Can Help Parents Save for Future College Expenses
In a June 2023 survey of 1,000 parents of teenagers by Discover Student Loans, 70% of subjects said they were worried about financing their kids’ college expenses. In addition, 68% of parents were concerned about the amount of debt their kids will be saddled with even after the parents offer up their own financial assistance.
Providing employees with much-needed information about 529 college savings plans and giving them a convenient way to contribute directly from their pay, can go a long way in helping to relieve the stress associated with one of their top financial concerns.
While in the past, the options for using unspent 529 funds were limited (and often meant facing tax and penalty consequences), the SECURE 2.0 Act allows savers to roll unused 529 funds — to a lifetime limit of $35,000 — into the beneficiary’s Roth IRA, without incurring the usual 10% penalty for nonqualified withdrawals or generating any taxable income. The new rule went into effect January 1, 2024 and might come as a relief to any employees who worry about having excess funds stuck in a 529 should their child end up not needing the money.
Recommended: The Importance of Offering 529 Plan Contributions in an Employee Benefits Package
7. Helps to Clarify Confusing Financial Topics
Many young professionals want to buy their first home, but they don’t know how to save for a down payment or secure a mortgage. New to the workforce, they also struggle to understand financial topics they weren’t taught in school, such as income tax deductions (especially as they get married and have children), the necessity of life insurance, and wealth management and investing.
At the same time, older employees might feel overwhelmed by the financial options available to them. With educational resources and access to experts through a financial wellness program, employees can find the information they need from vetted and trusted sources. In PwC’s survey, 68% of employees said they use their employer’s financial wellness services such as coaching, workshops or online tools.
8. Protects Employees
Sometimes healthcare benefits just aren’t enough. In the event of a health emergency, employees need to be prepared for insurance deductibles and other unexpected costs. Solid financial preparations can prevent them from dipping into savings or making hardship withdrawals from 401(k) plans. Those withdrawals can not only damage their prospects for long-term financial stability, but also create administrative headaches for HR.
Providing an automated emergency savings program is fast becoming a way for employers to help provide a foundation for financial well-being for workers. These plans allow employees to make paycheck contributions to a dedicated account (possibly with a company match), and can help make your workforce more financially resilient in the face of life’s “What Ifs.”
Recommended: How Much Should Your Employees Have in Emergency Savings?
9. Enhances Your Organization’s DEI Efforts
These days, many employers of all sizes have a diversity, equity and inclusion (DEI) strategy or program in place to increase inclusion in the workplace. Offering financial wellness benefits to employees is yet another way to foster a more equitable company culture.
The reason is that financial wellness benefits can help level the playing field by helping to empower minorities and underrepresented groups, who may have more financial stress and encounter more barriers to economic opportunities. Giving all employee populations access to programs that can help them buy their first homes, pay down student debt, save for emergencies, and invest for the future allows them to build wealth for generations to come.
Recommended: How to Support Your Low-Wage Workforce
10. Helps Employees Plan for Retirement
Employer-sponsored retirement plans can help to ease the financial stress that stems from retirement planning. In addition to offering a retirement plan, you might also provide education programs on planning for retirement, understanding different types of accounts available, and best places to get started based on age and goals.
In addition, you might consider instituting a 401(k) match for their student loan payments. Thanks to a provision in Secure Act 2.0 (that went into effect at the start of 2024), companies can match employees’ qualified student loan payments with contributions to their retirement accounts, including 401(k)s, 403(b)s, SIMPLE IRAs, and government 457(b) plans. With this benefit, employees won’t need to make the decision regarding whether to contribute to their 401(k)s or make student loan payments.
Recommended: How Does an HR Team Implement a Student Loan Matching or Direct Repayment Benefit?
The Takeaway
Financial stress is a major concern for today’s employees, and something a growing number of workers want their employers to help with. Providing support for financial wellness can help boost employee engagement and retention, stave off mental and physical health concerns, help your company recruit top talent, and even lead to a more inclusive and equitable workplace.
SoFi at Work can help. We provide the benefit platforms and education resources that can enhance financial wellness throughout your workforce.
Photo credit: iStock/Inside Creative House
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Feelings of Financial Insecurity in America Soar to Record High, Even as Consumer Anxiety About the Economy and Recession Recede Northwestern Mutual’s 2024 Planning & Progress Study finds just over half of U.S. adults expect recession this year, a significant drop from two-thirds who said the same in 2023 One-third (33%) of Americans say they … [Read more…]
MILWAUKEE, March 11, 2024 /PRNewswire/ — Northwestern Mutual announced today that 18 of its financial advisors earned a spot on the annual Barron’s Top 1,200 Financial Advisors list of the nation’s top wealth managers. This prestigious recognition is a testament to the skill and dedication of Northwestern Mutual’s honorees – trusted experts who are helping … [Read more…]
Stocks are shares of ownership in a company. To start investing in stocks, you would find a company that you like and think might grow in value and then purchase its stock through a brokerage account. If the stock price rises, you could sell your shares and potentially make a profit — or not if share prices decline.
Of course, when it comes to investing for beginners, you need to learn some basics to invest in stocks and do it well. Thanks to technology and various educational resources, you can get started using an app or online brokerage account and learn as you go. It has never been easier to build investing confidence as you gain experience. Here is a step-by-step guide for those who want to start investing in stocks now.
Key Points
• Stocks represent shares of ownership in a company and can be purchased through a brokerage account.
• Before investing in stocks, determine your investing approach and consider your time horizon.
• Different ways to invest in stocks include self-managed investing, using a financial advisor, or utilizing robo-advisors.
• The amount you invest in stocks depends on your budget and financial goals.
• Choose stocks based on thorough research, including analyzing a company’s financial statements and valuation metrics.
How to Start Investing in Stocks: 5 Steps
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1. Determine Your Investing Approach
Before you get started investing in stocks, you need to determine your investing approach. Because every person has unique financial goals and risk tolerances, there is no one-size-fits-all strategy to begin investing in the stock market.
Most people will need to decide whether they want a hands-on approach to investing or whether they’d like to outsource their wealth building to some sort of financial advisor.
Additionally, investors need to consider their time horizons before investing in stocks. Some investors want to invest long-term — buying and holding assets to build wealth for retirement. In contrast, other investors are more interested in short-term trading, buying and selling stocks daily or weekly to make a quick profit. The type of investor you want to be will help determine what kind of stocks you should buy and your investing approach.
The Different Ways to Invest in the Stock Market
Fortunately, various options are available for every type of investor as they begin to invest in stocks.
As mentioned above, some investors like to have a hands-on approach to investing. These investors want to make decisions on their own, picking what stocks are right for them and building a portfolio from the ground up. This self-managed strategy can be time-consuming but an excellent option for investors who have a general understanding of the markets or would like to learn more about them.
Other investors like to have experts, like a money manager, manage the investing process for them. While this investing approach may cost more than doing it yourself, it can be an ideal choice for individuals who do not have the time or energy to devote to financial decision-making.
2. Decide How Much you Will Invest in Stocks
How much you invest depends entirely on your budget and financial goals. Many financial experts recommend saving between 10% and 15% of your after-tax annual income, either in a savings account or by investing. With that guideline in mind, you may decide to invest with whatever you can comfortably afford.
Fortunately, it’s much easier to invest these days, even if you only have a few bucks at a time. Many brokerage firms offer low or no trading fees or commissions, so you can make stock trades without worrying about investment fees eating into the money you decide to invest.
Additionally, many brokerage firms offer fractional share investing, which allows investors to buy smaller amounts of a stock they like. Instead of purchasing one stock at the value for which the stock is currently trading — which could be $1,000 or more — fractional share investing makes it possible to buy a portion of one stock. Investors can utilize this to use whatever dollar amount they have available to purchase stocks.
For example, if you only have $50 available to invest and want to buy stock XYZ trading at $500 per share, fractional share investing allows you to buy 10% of XYZ for $50.
Asset Allocation
Asset allocation involves spreading your money across different types of investments, like stock, bonds, and cash, in order to balance risk and reward. Determining a portfolio’s asset allocation can vary from person to person, based on financial goals and risk tolerance.
Asset allocation is closely tied with portfolio diversification. Diversification means spreading one’s money across a range of assets. Generally, it’s like taking the age-old advice of not putting all your eggs in one basket. An investor can’t avoid risk entirely, but diversifying their investments can help mitigate the risk one asset class poses.
3. Open an Investment Account
Once you determine your investing approach and how much money you can invest, you’ll need to open a brokerage account to buy and sell shares of companies or whatever other assets you’d like to invest in.
Several investment accounts might make sense for you, depending on your comfort level in managing your investments and your long-term financial goals.
Professional option: Full-service brokerages
Many investors may use traditional brokerage firms, also known as full-service brokerages, to buy and sell stocks and other securities. A full-service brokerage offers additional services beyond just buying and selling stocks, such as investment advice, wealth management, and estate planning. Typically, full-service brokerages provide these services at high overall costs, while discount and online brokerages maintain scaled-down services with lower overall costs.
A full-service brokerage account may not be the best option for investors just getting started investing in stocks. These firms often require substantial account minimum balances to open an account. This option may be out of reach for most in the early stages of their investing journey.
Do-it-yourself option: Online brokerage
An online brokerage account is ideal for most beginning investors looking to have a hands-on approach to trading stocks and building a financial portfolio. Many online brokers offer services with the convenience of an app, which can make investing more streamlined. If you feel confident or curious about how to start investing at a lower cost than a full-service brokerage firm, opening an account with an online broker could be a great place to start.
Hands-off, automated option: Robo-advisor
If you’re interested in investing but want some help setting up a basic portfolio, opening an investment account with a robo-advisor might be best for you. A robo-advisor uses a sophisticated computer algorithm to help you pick and manage investments. These automated accounts generally don’t offer individual stocks; instead, they build a portfolio with a mix of exchange-traded funds (ETFs). Nonetheless, it’s a way to become more familiar with investing.
Retirement option: 401(k) and IRAs
Retirement accounts like employer-sponsored 401(k)s or individual retirement accounts (IRAs) are tax-advantaged investment accounts that can be great for the beginning investor trying to build a retirement nest egg. These accounts offer investors a range of investment choices, including individual stocks. You may also have access to tutorials, advisors, or other resources to help you learn how to start investing in these accounts.
💡 Ready to start retirement investing? Consider opening an IRA online.
Tip: Compare Costs and Features
No matter where you decide to open your investment account, be sure to research and compare costs and features within the account. For example, many brokerage accounts charge investment fees and commissions for making trades. Although investment costs can be quite low — and you can trade stocks without paying a commission — any investment fee can add up over time and ultimately reduce your overall investment returns.
Additionally, it helps to check if the investment account requires a minimum deposit to open an account. A minimum deposit can be a barrier to getting started for the beginning investor who doesn’t have much money to invest. However, many firms do not have minimum deposit requirements any longer.
4. Choose Your Stocks
Deciding what individual stocks to invest in can be challenging for most investors. There are countless ways to evaluate stocks before you buy.
Before choosing your stocks, you generally want to do a deep dive into a company’s inner workings to understand the company’s overall valuation and the stock’s share price.
As a beginning investor, you want to get comfortable reading a company’s balance sheet and other financial statements. All publicly-traded companies must file this information with the Securities and Exchange Commission (SEC), so you shouldn’t have trouble finding these financials.
One of the most fundamental metrics for understanding a stock’s value compared to company profits is its price-to-earnings (PE) ratio. Others include the price-to-sales (PS) ratio and the price/earnings-to-growth (PEG) ratio, which may be helpful for companies that have little to no profits but are expanding their businesses quickly.
These metrics, and other financial ratios, can help you determine what stocks to buy. And the advantage of owning individual stocks is that you can get direct exposure to a company you believe has the potential to grow based on your research. The downside, of course, is that investing doesn’t come with guarantees, and your stock’s value could decline even with thorough research.
💡 Recommended: 15 Technical Indicators for Stock Trading
5. Continue Building Your Portfolio
After you’ve decided what stocks to invest in, you generally want to continue building a portfolio that will help you meet your financial goals.
One way to bolster your portfolio is by buying mutual funds and ETFs rather than individual stocks. A benefit to investing in funds that hold stocks is that you can avoid some of the risks of being invested in individual stocks that may not perform well.
Whether investing in individual stocks or funds, you may want to consider the level of diversification in your portfolio that feels right for you. There is no consensus about the right way to diversify investments. For one person, ideal diversification could mean owning 20 stocks in different industries. For another, it could mean owning the “whole” market via a handful of mutual funds.
Once you get more comfortable investing in stocks and funds, you can employ numerous other investing strategies. You can add various securities, like bonds, commodities, and crypto, to your portfolio.
The Takeaway
Historically, investing in the stock market has been a way for some individuals to build personal wealth. These days, it’s never been easier for new investors considering getting into stocks to start. Whether you choose to work with a financial advisor or use an online broker or app, there are several ways to find a method that makes stock investing easy, fun, and potentially profitable. Of course, there are no guarantees, so it’s wise to take a step-by-step approach, start small if you prefer, do some research using the many resources available, and see what comes as you gain experience and confidence.
Investors can open an online investing account with SoFi Invest® to trade individual stocks, ETFs, or fractional shares with no commissions. Additionally, SoFi’s Automated Investing builds, manages, and rebalances portfolios with no SoFi management fee for those interested in investing in stocks through a more hands-off approach.
Start investing with your SoFi Invest account today.
FAQ
How do I invest $100?
You can invest $100 by opening an investing account that does not require a minimum account balance and purchasing shares of a stock or ETF that are less than $100. You can also use your funds to purchase fractional shares of whatever stocks you want to own.
How do I open a brokerage account?
You’ll need to take a few steps to open a brokerage account. First, you’ll need to find a broker that fits your needs. Once you’ve found a broker, you’ll need to complete an application and submit it to the broker. The broker will then review your application and, if approved, will open an account for you.
What is the S&P 500?
The Standard and Poor’s 500, commonly known as the S&P 500, is an American stock market index based on the market capitalizations of 500 large companies having common stock listed on the NYSE or NASDAQ stock exchanges. It is one of the most commonly followed stock market indices in the United States, along with the Dow Jones Industrial Average and Nasdaq Composite.
SoFi Invest® INVESTMENTS ARE NOT FDIC INSURED • ARE NOT BANK GUARANTEED • MAY LOSE VALUE SoFi Invest encompasses two distinct companies, with various products and services offered to investors as described below:
Individual customer accounts may be subject to the terms applicable to one or more of these platforms.
1) Automated Investing and advisory services are provided by SoFi Wealth LLC, an SEC-registered investment adviser (“SoFi Wealth“). Brokerage services are provided to SoFi Wealth LLC by SoFi Securities LLC.
2) Active Investing and brokerage services are provided by SoFi Securities LLC, Member FINRA (www.finra.org)/SIPC(www.sipc.org). Clearing and custody of all securities are provided by APEX Clearing Corporation.
For additional disclosures related to the SoFi Invest platforms described above please visit SoFi.com/legal.
Neither the Investment Advisor Representatives of SoFi Wealth, nor the Registered Representatives of SoFi Securities are compensated for the sale of any product or service sold through any SoFi Invest platform.
Stock Bits Stock Bits is a brand name of the fractional trading program offered by SoFi Securities LLC. When making a fractional trade, you are granting SoFi Securities discretion to determine the time and price of the trade. Fractional trades will be executed in our next trading window, which may be several hours or days after placing an order. The execution price may be higher or lower than it was at the time the order was placed. SOIN0622011
Northwestern Mutual’s All-Time-High Dividend, Revenue and Surplus Underscore Company’s Exceptional Business Results and Financial Strength in 2023 Company reports historic growth in its field force of financial advisors, its highest-ever dividend, strong investment performance, exceptional financial strength, and rapid expansion of its wealth business – all positioning Northwestern Mutual for continued long-term success MILWAUKEE, Feb. … [Read more…]
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There are many ways to manage your money, but there is always one key piece that you need no matter how much or little you earn. The best way to get ahead in life and work when it comes down to personal finances:
Planning.
Yes, a little bit of planning will make sure your bills are paid.
If you are looking to save money and make more, then this article is for you.
We have broken down five effective bill calendar strategies that can help boost your finances. With each strategy comes an eye-opening fact about how to make paying bills easier.
Use these tactics in order to get ahead of the game and be one step closer to financial freedom.x
The term “bill calendar” may seem like a jargon-y thing stuck in the past, but it’s actually an effective way to keep track of your finances and budget.
That being said, not all bill calendars are created equal. Make sure you choose one that meets your needs or is most suitable for what you’re looking for so you can get the maximum benefit from this tool!
What is a Bill Pay Calendar?
A bill pay calendar is a financial tool that enables an individual to manage, track, and forecast bills.
It is useful for those who have multiple bills each month or need to plan ahead for upcoming expenses.
This is one of the files you can find in our budget binder.
A bill pay calendar is typically used in conjunction with a budget planner to help manage financial goals and stay on track towards financial success.
This simple tool helps you manage your finances better. The useful trick is to see where all of our bills fall in relation to when we make money, so it’s easy enough for us to plan out what we need and don’t need.
The strategies are effective because they allow you a visual way to see your bills and expenses. Thus, making bill-paying much easier than ever before.
Why a Monthly Bill Calendar Works
A monthly bill calendar is a great way to keep track of upcoming bills and make sure you’re not missing any.
Also, it is helpful if you want to plan ahead for certain events like birthdays, holidays, or special occasions. Just to make sure you set aside enough money.
If you’re struggling to keep up with your bills, a monthly bill calendar can help.
It will remind you when it’s time to pay them and give you the proper schedule for future payments so that they don’t get delayed.
A monthly bill calendar is an effective way of organizing finances because it provides reminders about what needs to be paid on which day. This helps to ensure debts do not accumulate over time without being noticed until they become unmanageable.
Other benefits of a bill paying calendar:
Keeps you focused.
Motivation to improve your finances.
Visually track your progress.
Simple Bill Calendar Strategies
The financial benefits of a proper bill calendar include increased productivity, improved cash flow management, and long-term savings opportunities all brought about by thoughtful organization with an emphasis on efficiency in priority setting.
Just like with any time management idea, you must actually implement the system for it to work.
All of these strategies will give you a chance to get on top of your finances and start working towards getting out from under that large, unmanageable debt.
Five effective bill calendar strategies that will boost your finances include:
1. Use Budget Binder
Personally, I have found that those who have a printable budget binder stick to their budgets long term vs those who try to manage their finances digitally. That doesn’t mean you can use your favorite budgeting app (I love Quicken). It just means you are writing out key financial information for your reference or if someone needs to pay your bills.
If you’re looking for a way to organize your bills and keep track of when they are due, the bill calendar is an effective tool. By putting all of your bills on one page, it makes it easier to coordinate payments with your employer or other creditors.
The template allows you to add in expected paydays so that you can easily plan ahead.
2. Plan Reoccuring Time to Review
Not many people jump at the excitement of paying bills. Normally, it is a task that we put off until we just cannot wait any longer.
For me, I review our bills every two weeks. That is what I have found to work best for us.
To make the time more plausible, many couples will celebrate bill paying with a special treat or date night.
Do what you need to do.
Just make sure you review your bill payment calendar on a regular basis.
3. Avoid Paying Bills Late
Paying your bills late will incur additional fees; those penalities in extra fees and interest are just not worth it. In addition, your credit score will take a hit with each late payment.
By consistently paying your bills late, you will have access to less cash. On the flip side, you could be saving money by paying your bills on time.
To avoid paying bills late, many people have set up automatic payments. This can be done by setting up a direct debit or Automatic Clearing House (ACH) payment.
When looking at your bill payments calendar, decide what bills are going to be paid by what paycheck. Make a plan for your money.
That will help you avoid paying bills late.
4. Keep Track of Bill Due Dates
One of the most important tasks that households have is paying their bills on time. However, it can be difficult for those without a lot of organizational skills to keep track of bill due dates and upcoming bills.
One way to keep track of bill due dates is by using a calendar that has notes on each day, as well as other information such as what’s coming up in the near future.
You may want to color-code your bills by paycheck. Another option is to track your payments with colors, such as red for debt, green for paydays, etc.
Either way, you want to notate when you paid a bill and the manner you paid it.
5. Digital or Paper
Now, for the endless debate… do you use a digital or paper system? Or do you need to use both for double reminders?
Regardless of what you decide, you should use a monthly calendar printable template to track what needs to be done.
Here are some options on how to organize your bill calendar.
Keep your monthly bill calendar in your budget binder.
Print out the month’s schedule and hang it up on your refrigerator or wall for easy reference. This is an important habit because you’ll never miss due dates if you don’t have to worry about finding paper calendars or trying to remember which bills are due when.
Create a post-it note with the day’s due date on it and stick it to your monitor so you don’t forget.
Use Google Calendar or iCalendar, which are both free online calendars that can be accessed from any computer or mobile device. This allows you easy access when away from home but still keeps things relatively simple as well since these options only.
Many budget apps have cost-effective solutions with tons of cool features and helpful tools that will make your life easier.
The end goal is to keep things simple, allowing you more time for other tasks.
Bill Calendar Sample
Here is a bill calendar example.
You would personalize this for your needs and your expenses.
Remember, many times it is helpful for people to visualize how bills will be paid and when.
This helps with cash flow planning.
Bill Calendar Template
It is important to keep track of your bills and how much you have to pay each month. The best way to do this is with a bill calendar template that has columns for your monthly expenses, which include rent, utilities, phone service, groceries, etc.
Some effective strategies for keeping tabs on what’s due when are:
– Create a list of all the upcoming payments in order from high priority (such as a mortgage) to low priority (such as grocery store), and then put them in your calendar as they come due.
– Create a list of all the upcoming bills, rent from highest to lowest priority, and then put them in your calendar as they come due.
To make the most of your budget, you need to know where every dollar is going.
A bill calendar template will help you plan and prioritize which bills are due when so that money can be properly allocated for important expenses without letting any slip through the cracks or being overspent on things like entertainment.
FREE Printable Bill Calendar
A bill calendar is a type of monthly planner used to keep track of bills that are due. This free bill calendar printable can be downloaded and used personally.
Having a visual reminder of what’s coming up helps me stay focused and watch my spending because it gives me an idea at a glance of how much money comes out each month.
It also helps remind me when certain events occur such as income tax or mortgage payments.
Download your printable monthly bill calendar.(This is a perk for our readers who subscribe to our email list.)
A bill payment calendar is a helpful tool for keeping track of when your bills are due.
Bill Calendar App
A bill payment app is a form of software that helps people pay their bills online. It offers a way to manage the process and avoid any potential late fees.
Bill payment apps are useful for many individuals.
They can help you keep track of your monthly bills without having to use a paper calendar, which is typically cluttered with social events and day-to-day tasks.
Furthermore, bill month calendars organize recurring payments that occur on the same date each month so that they don’t get charged twice or renew prematurely before you know it!
Here are some great options:
How Will a Bill Paying Calendar Help You?
All in all, a bill calendar is another tool in the personal finance toolkit.
This bill organizer calendar is an important part of your managing money.
You can choose a checklist style or a monthly layout.
Bill calendars are a simple and effective way to keep track of your bills and expenses.
They can help you save money and come up with strategies to boost your finances. They come in many different types and are often used for budgeting purposes.
Many people use a bill calendar in conjunction with a budget binder with envelopes as well.
How do you see a bill calendar improving your finances?
From all of the free and paid budgeting apps, here are our top budgeting apps to check out!
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Empower Personal Wealth, LLC (“EPW”) compensates Money Bliss for new leads. Money Bliss is not an investment client of Personal Capital Advisors Corporation or Empower Advisory Group, LLC.
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Great way to use cash flow budgeting. Plus uses “envelopes” to budget.
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More importantly, did I answer the questions you have about this topic? Let me know in the comments if I can help in some other way!
Your comments are not just welcomed; they’re an integral part of our community. Let’s continue the conversation and explore how these ideas align with your journey towards Money Bliss.
Investing has become much easier over the years thanks to the popularity of robo-advisors. Rather than working with a human financial advisor, a robo-investing uses algorithms to make a wealth management plan for each investor.
There are many advantages to using these services. Robo-advisors are typically less expensive than hiring a financial advisor. They allow you to start investing in the stock market even if you don’t have much money to start with.
So if you’re looking for an easy, inexpensive way to get started with investing, a robo-advisor could be a great option for you.
10 Best Robo-Advisors: Uncovering the Standout Performers
Here is an overview of our top picks for the best robo-advisors, as well as a brief explanation about what we like about each one:
1. Personal Capital
Key Features:
Hybrid robo-advisor with access to human financial advisors
Advanced investment strategies including tax optimization
Comprehensive financial planning tools
Retirement and savings goal tracking
High minimum balance requirement
Who it’s best for:
Personal Capital is ideal for more advanced investors with higher account balances, as well as those who seek a combination of automated investing with human financial advisor support.
Its comprehensive planning and retirement tracking features make it a powerful platform for long-term wealth management.
2. Wealthfront
Key Features:
Diversified portfolios with 11 different asset classes
Tax-loss harvesting for all investment accounts
High-interest cash account
Automatic rebalancing and portfolio optimization
College savings plan (529) support
Who it’s best for:
Wealthfront is a strong option for investors seeking a fully automated robo-advisor with a focus on tax efficiency and diversified investments.
Its high-interest cash account and college savings plan support make it an attractive choice for those looking to cover various financial goals.
3. Betterment
Key Features:
Goal-based investing tailored to personal milestones
Automatic rebalancing and tax-efficient strategies
Socially responsible investing options
Access to human financial advisors (with premium plan)
No minimum account balance
Who it’s best for:
Betterment is a great choice for beginners and experienced investors alike, who want a goal-oriented approach to investing.
With its socially responsible investing options and access to a licensed advisor (with the premium plan), it provides a well-rounded platform for a variety of investors.
4. Ally Invest
Key Features:
Low account minimum and no trading commissions
User-friendly online platform
Various research-based tools
No advisory fees for managed portfolios
Integration with Ally Bank for seamless banking and investing
Who it’s best for:
Ally Invest is an excellent option for new investors looking for a low-cost, user-friendly platform with no trading commissions.
Its integration with Ally Bank makes it a convenient choice for those who want to manage their banking and investing under one roof.
5. Vanguard
Key Features:
Hybrid robo-advisor with access to Vanguard personal advisor services
Low-cost, diversified investment options
Retirement and college savings plans
Strong reputation and established history
Higher minimum investment compared to other robo-advisors
Who it’s best for:
Vanguard Digital Advisor is ideal for investors seeking a trusted, established provider with a focus on low-cost, diversified investments.
Its hybrid model offers the benefits of automated investing along with access to a human advisor, making it a strong option for those with larger account balances.
6. M1
Key Features:
Fractional share investing
Customizable portfolios or pre-built expert portfolios
No management fees or commissions
M1 Borrow feature allows borrowing against your portfolio
M1 Spend feature integrates banking and investing
Who it’s best for:
M1 Finance is well-suited for investors who want a high level of customization with their portfolios, allowing them to create their own investment “pies” or choose from pre-built expert portfolios.
As a cost-effective solution, it appeals to budget-minded investors who appreciate the opportunity to leverage their portfolio through borrowing or take advantage of integrated banking services.
7. Ellevest
Key Features:
Focus on socially responsible investing
Gender-specific investment advice
Goal-based investing approach
Access to career coaching and financial planners
Low fees
Who it’s best for:
Ellevest is an excellent choice for investors who prioritize socially responsible investing and seek a platform tailored to the unique financial challenges faced by women.
Its goal-driven approach, coupled with access to career coaching and financial planners, makes it a comprehensive platform for value-oriented investors.
8. Facet
Key Features:
Comprehensive financial planning services
Access to dedicated Certified Financial Planner (CFP)
Flat-fee pricing model
No account minimums
Not fully automated
Who it’s best for:
Facet Wealth is ideal for individuals who want personalized investment management services but can’t afford the fees associated with traditional financial advisors.
Its flat-fee pricing model and access to a dedicated CFP provide a high level of personalization and support, making it a valuable option for those seeking a more hands-on approach to wealth management.
9. SoFi Automated Investing
Key Features:
No management fees
Low minimum balance requirement
Automatic rebalancing
Access to certified financial planners
Robust customer service
Who it’s best for:
SoFi Automated Investing is an excellent option for investors seeking a low-cost, accessible platform with strong customer support.
With no account fees and a low balance requirement, it’s a great choice for those just starting their investment journey or those who want access to financial planning resources without paying high fees.
10. Blooom
Key Features:
Focus on retirement savings (401(k)s and IRAs)
No minimum account balance requirement
Flat yearly management fee
401(k) analysis and optimization
Auto rebalancing and investment recommendations
Who it’s best for:
Blooom is a standout option for investors looking to optimize their retirement savings, specifically in 401(k)s and IRAs.
With its flat yearly management fee and no minimum account balance requirement, it’s an accessible platform for those who want to improve their retirement investment approach and maximize their long-term returns.
A Side-By-Side Comparison of the Best Robo-Advisors
Listed below is a side-by-side overview of what each robo-advisor has to offer.
BROKER
FEES
PROMOTION
ACCOUNT MINIMUM
Ally Invest
0.0%
No promotions offered
$100
Personal Capital
0.49%-0.89%
No promotions offered
$100,000
Wealthfront
0.25%
$5,000 in assets managed for free
$500
Betterment
0.25%
A year of free management
$0
FutureAdvisor
0.50%
Three months of free management
$10,000
Vanguard
0.30%
No promotions offered
$50,000
Bloom
$10 per month
$10 off first year
$0
M1 Finance
0.0%
No promotions offered
$0
Ellevest
0.25%
Possible $750 cash bonus
$0
Facet Wealth
$480 per year or more
No promotions offered
$0
SoFi Automated Investing
0.0%
Free career counseling and loan discounts
$100
Wealthsimple
0.40%-0.50%
$10,000 in assets managed for free
$0
How do robo-advisors work?
A robo-advisor is a specialized software that provides automated investment portfolios based on your goals and risk tolerance. Your risk tolerance is based on your answers to the questions provided.
Robo-advisors use algorithms to choose the right asset allocation based on your risk tolerance, investment goals, and time horizon, providing a customized and efficient approach to portfolio management. Some services give you access to human advisors as well.
Robo-advisors are a viable option for anyone who wants to start investing but can’t afford a portfolio management firm. Or if you just want a hands-off approach to investing, robo-investing is a great choice for diversifying your investments. These services typically have low management fees and require low account minimum balances.
So if you don’t have tens of thousands of dollars at your disposal but still want to start building an investment portfolio, using a robo-advisor has a much lower barrier to entry. There are many online services available on the market, but the ones listed above stand out from the pack.
How to Choose the Right Robo-Advisor for Your Needs
Selecting the right robo-advisor requires considering your investment goals, risk tolerance, and personal preferences. Here are some factors to help guide your decision-making process:
1. Determine your investment goals
Before choosing a robo-advisor, it’s essential to outline your financial goals. Are you saving for retirement, building an emergency fund, or working towards another specific milestone? Understanding your objectives will help you find a robo-advisor that aligns with your needs and offers relevant services.
2. Assess your risk tolerance
Risk tolerance refers to your comfort level with the potential fluctuations in the value of your investments. Some investors prefer a conservative approach, while others may be willing to take on more risk for potentially higher returns. Choose a robo-advisor that offers investment options aligned with your risk tolerance and provides suitable recommendations based on your preferences.
3. Compare fees and account minimums
Fees and account minimums are crucial factors to consider when selecting a robo-advisor. Some platforms charge a percentage of your assets under management, while others may have a flat fee.
Additionally, account minimums can vary widely, ranging from no minimum to tens of thousands of dollars. Choose a robo-advisor with a fee structure and minimum investment requirement that suits your financial situation.
4. Review available investment options
Different robo-advisors offer varying investment options, including individual stocks, bonds, ETFs, and mutual funds. Some platforms may also provide access to socially responsible investments or other specialized options. Ensure the robo-advisor you choose offers options that align with your goals and values.
5. Consider additional features and services
Many robo-advisors offer added features and services, such as automatic rebalancing, tax-loss harvesting, and access to human advisors. Some platforms may also provide banking services or wealth management tools. Assess which additional features are important to you and select a robo-advisor that meets your requirements.
6. Evaluate the user experience
The user experience, including the platform’s ease of use, customer support, and educational resources, is an essential aspect of choosing a robo-advisor. Look for platforms with intuitive interfaces, responsive customer service, and helpful resources to guide you through the investment process.
7. Read reviews and testimonials
Researching reviews and testimonials from current users can provide valuable insight into a robo-advisor’s performance, customer satisfaction, and any potential issues you may encounter. Look for reviews from reputable sources and users with similar objectives and investment preferences to ensure the robo-advisor is the right fit for your needs.
What should you look for in a robo-advisor?
When researching robo-advisors, it’s crucial to know what features and qualities are essential for a successful investment experience. Here are five things you should keep in mind when you’re considering different services.
Management fees: Most robo-advisors will charge an annual fee. This is usually calculated as a percentage of your total assets. You should make sure you understand the management fee structure because this will cut into your earnings.
Types of accounts offered: You should make sure you have a general understanding of the different accounts offered. For instance, retirement accounts like Roth IRAs and 401(k)s will have limits on how much you can contribute each year. Make sure you understand the difference between a taxable investment account and tax-deferred or tax-free accounts offered and how they benefit your financial goals.
Investments: It’s a good idea to familiarize yourself with the types of investments offered. For instance, many robo-advisors offer low-cost index funds, mutual funds, and ETFs. You should make sure that you like the accounts being offered and that they are fairly low cost.
Rebalancing: Since your investment portfolio will fluctuate, over time, it’s easy for it to become out-of-sync with your overall investing goals. You should look for a company that offers automatic portfolio rebalancing.
Access to financial advisors: And finally, one of the benefits of using a robo-advisor is that it’s a hands-off approach to investing. But some robo-advisors offer access to financial planners, and this offers many benefits. Having a financial planner involved brings a human element to your portfolio and makes it more personalized.
An Explanation of the Different Investment Options Available through Robo-Advisors
Robo-advisors provide investors with a variety of investment options to create a well-diversified portfolio tailored to their risk tolerance and financial objectives. Understanding the different options available can help you make informed decisions about your portfolio. Here are some of the most common options offered by robo-advisors:
1. Exchange-Traded Funds (ETFs)
ETFs are a popular investment option among robo-advisors due to their low costs and broad diversification. An ETF is a collection of securities, such as stocks, bonds, or commodities, that tracks a specific index or sector. ETFs trade on stock exchanges, just like individual stocks, and offer investors exposure to a wide range of asset classes, industries, and regions.
2. Index Funds
Index funds are mutual funds that track the performance of a specific market index, such as the S&P 500 or Nasdaq Composite. Like ETFs, they provide broad diversification and have low management fees. By investing in an index fund, you’re essentially buying a small piece of every company within that index, reducing the overall risk in your portfolio.
3. Mutual Funds
Mutual funds pool the investments of multiple investors to purchase a diversified portfolio of stocks, bonds, or other securities. They are less common in robo-advisor portfolios due to their higher fees compared to ETFs and index funds, some robo-advisors still include them as an investment option, particularly for specific sectors or strategies.
4. Bonds
Bonds are debt securities issued by governments, corporations, or other entities to raise capital. When you invest in a bond, you’re essentially lending money to the issuer in exchange for periodic interest payments and the return of the principal amount at the bond’s maturity. Bonds are typically considered less risky than stocks and can provide a steady income stream, making them a popular choice for conservative investors or those nearing retirement.
5. Real Estate Investment Trusts (REITs)
REITs are companies that own, operate, or finance income-producing real estate properties. They allow investors to gain exposure to real estate investments without the need to buy or manage properties directly. REITs can provide diversification and income potential to a portfolio, as they typically pay regular dividends from the rental income generated by their properties.
6. Socially Responsible Investing (SRI) and Environmental, Social, and Governance (ESG) Funds
SRI and ESG funds focus on investments in companies that meet specific ethical, environmental, social, or governance criteria. These funds allow investors to align their investment portfolios with their values and support businesses that have a positive impact on society and the environment. Some robo-advisors offer SRI and ESG options to cater to the growing demand for responsible investing.
7. Target-Date Funds
Target-date funds are designed to simplify long-term investing, particularly for retirement planning. These funds automatically adjust their asset allocation over time, gradually shifting from higher-risk investments like stocks to more conservative investments like bonds as the target retirement date approaches. This helps investors maintain an age-appropriate risk level in their portfolios without needing to make manual adjustments.
Tips for Monitoring and Adjusting Your Investment Strategy with a Robo-Advisor
While robo-advisors are designed to automate much of the investment process, it’s essential to periodically review your investment plan and make adjustments as needed. Here are some tips for monitoring and adjusting your strategy when using a robo-advisor:
1. Regularly review your risk tolerance and investment goals
Your risk tolerance and investment goals may change over time due to personal circumstances or market conditions. Ensure you update your robo-advisor profile to reflect any changes, as this will help the platform adjust your portfolio to align with your current objectives and risk appetite.
2. Monitor your portfolio performance
Keep an eye on your portfolio’s performance and compare it to relevant benchmarks or other investment options. This will give you an idea of whether your robo-advisor is effectively managing your investments and meeting your expectations. If your portfolio consistently underperforms, it may be time to consider other investment strategies or try a different robo-advisor.
3. Rebalance your portfolio as needed
While many robo-advisors automatically rebalance your portfolio, it’s still a good idea to review your investments periodically. If you notice significant deviations from your target allocation or if your investment goals change, you may need to adjust your portfolio accordingly.
4. Stay informed about market trends and developments
Even though robo-advisors handle most of the investment decisions for you, it’s essential to stay informed about market trends and developments. This will help you better understand your portfolio’s performance and make more informed decisions about any adjustments you may need to make.
5. Evaluate the robo-advisor’s features and offerings
Periodically review the features and offerings of your robo-advisor to ensure they still align with your needs and preferences. Some robo-advisors may introduce new investment options, tools, or services that could benefit your investment strategy. If you find a different robo-advisor that better suits your needs, don’t hesitate to switch.
6. Consider seeking professional advice
If you have concerns about your investment approach or need help understanding complex financial situations, consider consulting a certified financial planner or other financial professional. While a robo-advisor can be an excellent option for many investors, there may be times when personalized advice from a human advisor is necessary.
Bottom Line
Robo-advisors are an excellent solution for investors seeking a low-cost, user-friendly approach to growing their wealth. They provide the advantages of professional portfolio management and access to diverse investment options without the hefty fees typically associated with traditional financial advisors.
As you embark on your investment journey, remember to consider your long-term goals, risk tolerance, and personal values when selecting a robo-advisor. Make sure to evaluate management fees, account types, and available investment options to ensure your chosen platform aligns with your investment strategy.
Keep an eye on your portfolio and leverage the tools and features offered by your robo-advisor to maximize returns, optimize asset allocation, and stay on track to achieve your financial goals.
By understanding the full potential of robo-advisors and making informed decisions about your investments, you can confidently take charge of your financial future and reap the rewards of a well-managed, diversified portfolio.