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In this video, we discuss 3 reasons why investing in Robo Advisors might not be the best choice for you, and 3 reasons why it might.
Want to start investing with Robo Advisors? Use these links to get freebies:
StashAway MY ►
StashAway SG ►
(FREE 6 months management fees)
Wahed Invest ► (use code EMIBIN1 to get RM10 FREE when you sign up)
No investment is perfect and there are always downsides to any asset class you choose.
If you decide to buy individual stocks – what if you chose the wrong one?
ETF’s are generally safer, but you can still choose the wrong ETF’s.
Roboadvisors help you choose the right ETF’s based on your risk preference, and as with any other investment class, it comes with its own unique pros and cons.
FLAW #1 – UNNECESSARY FEES
All ETF’s charge what they call an expense ratio, but all robo-advisors charge an additional fee on top this expense ratio.
These fees (expense ratio + robo-advisor fee) are usually deducted from your returns, so there’s no need for you to pay anything extra.
Instead of paying these these fees, you can just individually buy all the ETF’s in a portfolio separately from the robo-advisor.
This way you only pay expense ratio, and this makes sense for apps like Wahed Invest, where there are only 4 different investments classes to choose from.
It’s harder to do this for apps like StashAway & MyTheo because they offer a lot more asset classes, but it’s technically still possible.
If you invest 1k a month for 30 years, fees will cost you around 100k. The more you invest, the more it’ll be.
FLAW #2 – NO CONTROL OVER INVESTMENTS
With robo-advisors, you dont get to choose what you’re invested in. Instead you have to trust the companies to do well, and they know they can’t just invest in something like the S&P500 and have average returns.
But if they do decide to invest in certain assets and you disagree, you can’t do much about it.
For example, my very aggressive StashAway portfolio has allocations in gold and REITs. What if I want to invest in gold or REITs?
On Wahed Invest, my very aggressive portfolio has allocations in Sukuk which is essentially a bond.
What if in my personal view, very aggressive portfolios should be very aggressive. Why bonds and commodities? Maybe there should be cryptocurrencies instead 😉
FLAW #3 – NO CONTROL OVER TIMING
This is a small flaw because we’re not meant to time the market with long-term investments like this anyway.
But because of the process of how all robo-advisors work, there’s a slight timing delay in terms of when your assets are being bought or sold.
Lets say you have 1k invested in a robo-advisor now and you submit a withdrawal today expecting to get your 1k back.
But the company needs some time to execute the sell order, maybe 1 or 2 days later.
What if the value of investments drop within these 2 days? You’ll get less than 1k banked into your account.
BUT, we still invest in Robo Advisors despite these flaws. Here’s why:
REASON #1 – LOW BARRIER TO ENTRY
Not everyone has a lot of money to start and most robo-advisors require less than RM100 to get started investing.
This is only possible they pool your money and can therefore buy fractional shares on our behalf.
You can DIY through brokers that allow fractional shares, but there are not many out there yet.
Even though you’ll pay more in fees, robo-advisors give access to the masses to start investing which is invaluable.
REASON #2 – PASSIVE INVESTING
Most investors should have ETF’s in their portfolio as a foundation of their portfolio.
REASON #3 – BEGINNER FRIENDLY
A lot of people are deterred from investing because they think it requires a lot of knowledge and its difficult.
But should YOU use robo-advisors?
Watch the entire video to find out!
Timecodes:
00:00 – Why You Shouldn’t Invest In RoboAdvisors (And Why We Still Do)
0:37 – What’s the best investment?
1:07 – Robo Advisor Flaw #1
4:37 – Robo Advisor Flaw #2
6:02 – Robo Advisor Flaw #3
8:01 – Why we still use Robo Advisors
8:12 – Robo Advisor Strength #1
9:27 – Robo Advisor Strength #2
11:04 – Robo Advisor Strength #3
12:35 – Should YOU invest with Robo Advisors?
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These videos are for entertainment purposes only. We are not financial advisors and this is not financial advice. You (and only) you are responsible for your financial decisions.
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Do YOU use Robo Advisors?
If you want to try them out for free, use these links to get some awesome freebies:
StashAway MY ► http://themillennialfinance.com/stash
StashAway SG ► https://themillennialfinance.com/stashawaysg
(FREE 6 months management fees)
Wahed Invest ► https://wahedinvest.com/get-started-selector/ (use code EMIBIN1 to get RM10 FREE when you sign up)
Hello,hope someone can help me how to contact sir Millennial Finance
Hope you can notice me too sir
Thank you
Robo-advisor to me, is a good alternative to unit trust because the fee is lower and requires less research from my side.
For robo – advisor, I use both stashaway and syfe. Personally I prefer syfe because it seems that the returns are higher and they have option like REITS and 100% US stocks. If you are interested to sign up for syfe, feel free to use my referral code.
My SYFE referralcode: SRPR8BTPB
Great video, not many people talk about these but( let me be the devil's advocate and correct me if i am wrong):
1. unusual management fees (0.6%): unit trust does the same thing but actively trade which cost 1.2 – 1.5% so I think its a win. Plus, if you copy and pay do it yourself, arent you subjected to sales fees for each purchase.
2. No control: many unit trust does not have autonomy. Plus, malaysian country manager stated less than 10% uses their manual optimisation so thats why they take it away to make it more seemless. If you can choose your own portfolio instead following theirs but loses money, i think they will afraid they will be blame for something they have no control over.
3. Time the market: this only applies to active traders right? since its not a trading platform but a passive income instruement, it really their purposes right?
Anyway, I hope my opinions be corrected so we both can learn but i really like these type of video so keep it up.
Why in the world I will invest in halal stuff? Wahad is plain stupid, I don't want constraint while investing my money.
Do stashaway have the weekly deposit feature??
You've been mentioning about stashaway and wahed …
What about raiz ?
Is that robo advisor still valid in 2022 ? Is it still good ?
can do review Stockbit? Keep it up!
Replace the gold allocation in SA’s 36% risk portfolio to bitcoin pleaseeeeeee
I have been thinking, it would be great if SA or Wahed include Crypto in the portfolio? Maybe on the highest risk, but why would it be irresponsible?
Would you use roboadvisors as a form of retirement investment (30-year horizon) alongside EPF?
Since EPF generate returns of around~5% yearly, the risks/returns are not great. Aggressive roboadvisor portfolios on the other hand take on more risk and since we're young we can stomach the risk. Would like to hear your 2 cents on that.
👍
Do you prefer wahed or stashaway?
19% return on my robo advisor, yea that sucks, Your Dillisonal
Hopefully there is going to be a new video about Luno but gotta wait for another week aiyoooo
Half of this video is just me figuring out what is being said. I understand nothing about invest. This is a new language for me
Nice video !!very engage from beginning to end . Nevertheless business and investment are the easiest way to make money irrespective of which party make it to the oval office.
boleh bukak order for tshirt bro.hahaha
Hi bro, in your opinion, do you think investing in SNP 500 is better than Robo advisors?
The reason I'm using robo-advisor and as well as ASB it's too have a solid base foundation for me invest in other assets such as gold and real estate
You jump, I jump…heheh
Can you review Luno investment
Thank you for the sharing! That's very useful for a stashaway beginner =)
hye emir!!
My biggest allocation is in Robo advisor. No need to check everyday😂
Nice T-shirt bro!
how about witholding tax especially those equities from USA? what happens to that tax when we withdraw
i just started to incvest in SA nut it took to long to verify my acc and till now SA didn't invest yet my deposit. Italmost 4 days and wht can I say that Wahed Invest is faster than SA
What about stashaway simple? It's zero fee right?
pls do a video on CAPBAY & P2P
How much are you currently invested in SA? How much do you plan to invest in total in SA?
Great take man. Robo-advisors are suitable for beginner investors as well as those who want a hands-off approach.
First!