Do you ever feel scared and lost the direction of choosing the right investment? Do you ever feel that investing involves a certain proficiency in math that you never have? And do you trust yourself enough with large financial transactions?
If these sounds familiar to you, then a Robo advisor will be your lifesaver.
The concept of Robo Advisor
Robo advisor is a software product that can assist you in managing your investment without the need to seek a financial advisor or self-manage your portfolio. It will create a portfolio for you automatically according to your investment goals and risk tolerance. Robo advisor even can rebalance your portfolio which makes the changes towards the investments needed to match with your portfolio back to a target allocation.
What are the benefits of using a Robo Advisor?
- Passive investing. If you’re a person that may feel not comfortable by making your own investment decisions or not willing to spend much time researching, monitoring and rebalancing your portfolio, then a Robo advisor could be the best alternative for you to start investing.
- Get rid of investing mistakes. The main reason investors get poor outcomes is mostly due to their own behavior. Investors tend to make emotional decisions during market highs and market lows and even based on their instinct. Hence, using the software wouldn’t make such mistakes.
- You can automate the process. Once your account is active, the Robo advisor software would monitor the investment process in terms of investing more or less and make any changes in your portfolio in a given market sector. You don’t even have to log in to the account and trade your own.
What are the downsides of Robo Advisor?
- Narrow customization. Robo advisors require you to set your risk profile or investment goals. Usually, you are unable to alter with investment methodology decide individual investments in your portfolio or adjust your exposure towards specific geographical regions.
- Lack of transparent investing methodology. Normally, a savvy investor would be interested in the specific criteria of how Robo advisor used to select the exchange-traded funds (ETFs) or the way how a Robo advisor would choose to rebalance your portfolio. But this information usually is not available.
- Dividend withholding tax. As a foreign person purchasing U.S. stocks, all dividends will be subjected to a 30% withholding tax. Even though your Robo advisor platform will be able to seek partial reimbursement of these taxes for you.
What Robo Advisor platforms are there in Malaysia?
Since 2008, Robo advisors have already existed in the market. While the first Robo advisor was only launched two years ago in Malaysia which is Singapore-based StashAway. A year later, MyTHEO and Wahed Invest entered the market as well.
Expected two more Robo advisors which are Raiz and Robowealth will be launched this year in Malaysia.