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Using robo-advisors likeWealthfront or Bettermentcan save you money compared to hiring a wealth management firm.
However, your approach should still have some hands-on aspects.
Below, three financial experts weighed in with money moves theyd recommend for peopleusing a robo-advisor.
Set Financial Goals
The foundation of a successful investment strategy is a clear set offinancial goals.
Setting goals isnt something you’re able to outsource to a software program.
Robo-advisors typically offer goal-setting tools that help you visualize your financial objectives and track your progress.
Use these features to align your portfolio with your aspirations.
By setting more precise goals, youre helping the robo-advisor better customize your investment plan.
This allows you to keep more of your investment returns working for you over the long term.
Many robo-advisors offertax-loss harvestingfeatures that will automatically sell losing investments to reduce your tax liability.
Tax-loss harvesting can be particularly advantageous in taxable accounts, as it helps minimize your capital gains taxes.
Adjust Risk Tolerance
Your risk tolerance is central to your investment strategy, and it can change over time.
As your financial situation and goals evolve, your risk tolerance may change, as well.
Robo-advisors typically offer risk assessment questionnaires to help determine your risk tolerance.
Take advantage of these tools and adjust your portfolio whenever you have a major life change.
Financial markets are dynamic, and your personal circumstances may change over time.
Regular portfolio reviews help ensure that your investment strategy stays aligned with your goals and risk tolerance.
Be sure youre taking a look at your portfolio at least once a year.
During these reviews, assess your portfolios performance, asset allocation and any changes in your financial goals.
Robo-advisors often providedetailed performance reports and insightsinto your portfolios composition.
Use these tools to stay informed and make any necessary adjustments.
Consider a hybrid approach, combining the efficiency of a robo-advisor with the personalized guidance of a human advisor.
For an additional fee, many robo-advisors offer human advice for a morecomprehensive financial planning experience.
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