How are robo advisors different from investing in mutual funds?

The following are the three differentiating value propositions.

(1) Investment Strategy

Robo-advisors like AutoWealth take a passive market-returns approach towards investing. A comprehensive research by Standard & Poors Dow Jones compiling the investment performance of thousands and thousands of active investment managers (ie. unit trusts) for more than a decade found that an overwhelming majority of 80% to 90% of professional investment managers who pick stocks and time markets consistently underperforms the general markets over the short, medium and long-term. Consistent with the S&P Dow Jones research conclusions, you would realise that our investment performance is superior than mutual funds (ie unit trusts) with a similar investment mandate. You may read more about our investment strategy, access the S&P Dow Jones report and also review our investment performance vis-a-vis unit trusts with a similar investment mandate at https://www.autowealth.sg/strategy.php

(2) Low Cost

Robo-advisors like AutoWealth charge about 1/4 the fees of mutual funds (ie unit trusts). Read more: https://www.autowealth.sg/fees.php

(3) Hassle-free, Unbiased & Real-time Access

Through a robo-advisor like AutoWealth, the process to start an investment is 3 simple steps, anytime anywhere. This means an investor no longer run the risk of meeting a financial advisor who sells him/her something that is not suitable but something that makes more commission for the financial advisor. This also means investing without the pressure of hard-selling. This also means an investor can get real-time access to track how his/her investments are performing and learn about market developments that he/she ought to be aware of.

A mutual fund is a pool of funds gathered from many different investors. These funds are handled by money managers who make decisions about which assets to buy and sell. While the robo-advisor is a software program that picks investment options based on pre-set algorithm.

The main advantages of robo-advisors over mutual fund is the low cost and transparency. The minimum cost to invest in a mutual fund is around 1.5% and to sell is 1% in addition to other additional fees. Whereas, robo-advisors offer management of your portfolio at a lower cost and do not have additional charges. However, mutual funds tend to have a greater exposure to more financial products such as options, futures, contracts since it is an activiely managed fund. Mutual funds have also been around much longer than robo-advisors and the lack of historical data poses some risk for investors.