Q: I have seen a fair amount of press on so called Robo Investing firms such as Wealthfront, Betterment and others. From what I can tell these firms follow a good deal of the best advice out there. They use ETF’s and low fee index funds in diversified portfolios to manage your investment. Are these Robo Adviser firms a good investment strategy? Are they a better value than using traditional advisors such as Edward Jones or Ameriprise?
A: I intend to do an article for MarketWatch regarding Robo Investing firms in the coming months. They are generally doing a good job of asset allocation and fund/ETF selection. The one process they do, that is difficult for a lot of investors is rebalancing the portfolio. Are they a better value than using commission-based advisors? Yes, if the investor can make sure they understand their own return needs and risk tolerance. A lot of investors panic during major market losses. I suspect the robo advisor will not be effective in helping those people stay the course. But, if you combine the robo advisor with an outside hourly advisor, that might help during times of great stress.