Should You Start Automating Your Investments?

Investing your money can be a very time-consuming endeavor. A successful investment usually requires ample research, with so many variables to consider and numbers to analyze. As a result, it’s not surprising that automatic investing is becoming an increasing trend. In an age where our days are filled to the brim with work and assignments, automating your investments can provide a relief to the many intricacies and time-consuming nature of tactfully investing your hard-earned money.

The platforms that help you automatically investment are often referred to “robo advisors.” According to Forbes, some of the more popular iterations are Betterment and WealthFront. Their services include creating a portfolio, investing in ETFs and rebalancing/reinvesting dividends. Some services control every aspect of investing, while others give you more freedom to tinker with the automated settings. In many cases, a skilled advisor sets the ETFs and allocates the assets.

Although some may yearn for greater flexibility, automatic advising offers an accessible and potentially rewarding method for millennials especially to explore the power of investments. Some tips to consider when starting to automatically invest include:

Identify Your Financial Goals

The first course of action is to figure out how much you want to invest. For a quick way to get a ballpark estimate, calculate the number of paychecks you will receive during a specific period, in addition to general living costs. Once you figure out how much you can invest per year, divide that by the number of paychecks you plan to receive per year. The resulting number is very useful for getting started with automated investing, since many automated investing platforms use per-paycheck settings for how much money to automatically invest each pay period.

Consider Your Lifestyle

As a good frame of reference, try tracking the time you spend on investments over the course of a month. If the workload isn’t an issue, then perhaps automated investments should be considered at another time in the future. However, if you’re anticipating less free time in the near future and/or think you can make better use of time spent on manually investing, then automated investments are likely an ideal solution. Some enjoy investing manually and have the time to do so, but others don’t. Evaluate your personal lifestyle and investment preferences to figure out whether to proceed with automated investing.

Explore Various Providers

There are many different automated investing services. Although they offer many of the same services, there are differences that should be considered. Three of the more popular and trusted automated investing platforms are:

• WealthFront – Their service’s asset allocation includes ETFS that invest in dividend stocks and REITs, with a management fee of 0.25% of any assets over $10,000. A minimum deposit of $500 is required to open an account. They offer the unique ability to allow users investing over $100,000 to take advantage of their direct indexing tax harvesting, which WealthFront says “could add as much as 2.03% to your annual investment performance.”
• WiseBanyan – If you’re looking for a free automated investing advisor, then WiseBanyan may be your solution. Although a fee is still required for ETFs, WiseBanyan’s asset allocation service is free. They make their money via add-ons, such as tax harvesting. Their service offers a great way to familiarize yourself with automated investing without making a commitment to one particular platform.
• Betterment – One of the first and most well-known automated investing services, Betterment provides a nicely customizable interface where users can select precisely how much they want to invest in bond and stock ETFs. Once these settings are created, the service allocates the investments for value ETFs. Although the service doesn’t include REITs, Betterment has drawn praise for its very easy-to-use website, which offers tools and data via helpful analytics that show where your investments are going. Fees range from 0.15% to 0.35%, with Betterment offering tax loss harvesting tools to any taxable accounts over $50,000.

Visit each site and read up on their user-specific fees and features to evaluate which platform is best for you and your personal finances.

Although the prospect of automated investing can seem initially daunting, financial planning and exploring the various providers should instill confidence in any willing investor that finds the general process to be overly time-consuming. Automated investing may be new, but it’s working well for many people.