I'm planning to make some long term investments but am caught between ETFs and Robo-Advisors. Anyone with any thoughts about this? What did you consider before settling on either of them?
Hi Dominic! I’ve been doing some research into the common investment options available and considered ETFs vs Robo-Advisors too so here’s my little analysis.
Some quick facts about ETFs:
Some quick facts about Robo-Advisors:
TL;DR You should make a long term investment in Robo-Advisors if you’re an investor that:
Now moving on to comparing between ETFs and Robo-Advisors:
#1 What is being invested:
#2 Degree of autonomy:
#3 Method of investment:
#4 Costs associated:
While the fees associated with Robo-Advisors are indeed lower than investing via a fund manager, you would still incur additional costs compared to buying the ETF and managing your investment portfolio on your own. Therefore, you should evaluate if these Robo-Advisor fees are worth it in the long term. Intermediary fees aside, do take note of minimum investments and transaction costs associated with investing in ETFs as an individual too. Some Robo-Advisor companies might have minimum investments too!
Long term investments:
You mentioned that you’re looking for a long term investment strategy and both ETFs and Robo-Advisors are great investment options for the long term as they are both liquid.
This means that you can sell your portfolio whenever you deem fit, or in your case, when your ‘long term’ timeframe is up. I personally find Robo-Advisors more liquid than ETFs. Since the algorithm would manage your entire portfolio, you can decide to cease the long term investment whenever you like to. Investing in ETFs as an individual means managing and reviewing your portfolio on your own before selling them away. I feel that this process would take a tad bit more effort and time compared to leaving it in the hands of the Robo-Advisor’s algorithm. But at the end of the day, to each his own.
More importantly, diversifying is key :) Ultimately, you can invest in both Robo-Advisors and ETFs at the same time as your long term investment strategy as they both help to diversify your portfolio. I hope this was helpful to you!
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