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Robo-Advisors: When You Have a Lot More to Lose than Money

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Update 5.2.22: Just when you thought robo-advisers couldn’t get worse, they’re marrying up with ESG investing, which you know from here, here, and here that you should avoid. The target of these two investing fads? Young people, of course. The Wall Street Journal reports:

More young adults are looking to invest in ESG, but many don’t know where to start and can’t meet the investment minimum to work with a full-service financial adviser.

Money-management firms are adding options to attract these customers, for whom investing even small amounts with an environmental, social or governance focus—while paying low fees—is a priority.

While these relatively inexpensive platforms do offer lower investment minimums, ease of use and ESG products, some can lack the ability to target specific themes or causes that investors might be looking for. What’s more, annual fees could still bite into your portfolio’s value.

Originally posted May 20, 2020.

Coronavirus Infects Stock Market: Part L

With casinos slowly reopening (sorry, most buffets are still closed), it looks like gamblers found a home with Nasdaq.

While the world, as we know, has basically come to an end, the tech-laden Nasdaq is up a couple percent year-to-date. Welcome to Planet Hollywood.

One is reminded of the dot.com bust especially when Shopify, a Canadian tech company, trades at a larger market cap than Royal Bank of Canada. Pop quiz: One was founded in 2004, the other in the 1800s.

Recently, I was asked about robo-advisors: You set-up an account with a low minimum, answer a questionnaire, and an algorithm invests you in a basket of mutual funds, ETFs, and/or stocks.

The robos save money on phone reps, have a big marketing spend, and a neat looking website.

But what if there’s a problem? A couple of years ago, when stocks were down 1,600 points, Bloomberg reported that the websites of robe-advisers Wealthfront Inc. and Betterment crashed. This is one of the MANY reasons robo-advisors will NEVER work for investors–NEVER. What a SHAM.

Also, it’s been my experience that investors want regular conversations about their life savings, especially when they’ve made money over a lifetime and it would take another one to replace the losses.

Losing $500 on a company like Shopify might be a cheap education to help a young saver seek out a diversified portfolio with the help of a robot.

Investing your life savings for and during retirement might require a more personal touch, especially when you have a lot more to lose than money.

Read my entire series, Coronavirus Infects Stock Market here.

 

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E.J. Smith - Your Survival Guy

E.J. Smith is Founder of YourSurvivalGuy.com, Managing Director at Richard C. Young & Co., Ltd., a Managing Editor of Richardcyoung.com, and Editor-in-Chief of Youngresearch.com. His focus at all times is on preparing clients and readers for “Times Like These.” E.J. graduated from Babson College in Wellesley, Massachusetts, with a B.S. in finance and investments. In 1995, E.J. began his investment career at Fidelity Investments in Boston before joining Richard C. Young & Co., Ltd. in 1998. E.J. has trained at Sig Sauer Academy in Epping, NH. His first drum set was a 5-piece Slingerland with Zilldjians. He grew-up worshiping Neil Peart (RIP) of the band Rush, and loves the song Tom Sawyer—the name of his family’s boat, a Grady-White Canyon 306. He grew up in Mattapoisett, MA, an idyllic small town on the water near Cape Cod. He spends time in Newport, RI and Bartlett, NH—both as far away from Wall Street as one could mentally get. The Newport office is on a quiet, tree lined street not far from the harbor and the log cabin in Bartlett, NH, the “Live Free or Die” state, sits on the edge of the White Mountain National Forest. He enjoys spending time in Key West and Paris. Please get in touch with E.J. at ejsmith@yoursurvivalguy.com