Can I just rely on robo-advisors for investment for the rest of my life?

Hi Anon,

On one hand, Robo-advisors are a good investment tool that can produce good returns for you without requiring much work on your part. So technically, it is possible to just rely on them for the rest of your life. But there are definitely disadvantages to doing so.

Firstly, you will be paying higher fees than if you choose to DIY. While the fees seem to be small, when your AUM grows to become significantly large, even a 0.4% fee can amount to a lot of money every year. If you compare this with the average expense ratio of large ETFs, you will pay a lot more in fees.

Next, if you become over-reliant on Robos, then you are at their mercy. If they choose to increase their fees, you will be forced to pay it because you don't know how to do any better yourself. While there may not be any incentive for them to do so, there's no saying that it won't happen.

On a similar note, if for some reason, Robos were to go away in the future, then you'd be left not knowing how to manage your own investments, which is definitely bad because by then, you'd probably have a significant amount of assets invested.

So while it's possible to only use Robos until you retire, that's only assuming that Robos will be around until then, and that they will continue performing as well or even better than they have been. Again, there's probably a strong argument for why these assumptions would be true, but you can't deny that there' s a chance that they aren't.

Personally, I think it's good to be self-sufficient with investing and learn how to do it yourself, even if you enjoy using Robos. At least that way, you'll be able to handle your own if anything were to happen.

Hope this helps & all the best!

Regards,

thefrugalstudent