You know that phrase, “Time is money?” It doesn’t just apply to unnecessary meetings and project schedule delays. The more time you spend trying to figure out your personal expenses, rainy day funds, and long-term investments, the less time you might have to actually put your money to work.
Thanks to a host of budgeting apps, crunching the numbers might be easier than ever. But whether you’re using 21st-century tech or pen and paper, a good starting point could be to look at your take-home pay and compare that to your expenses each month, and then start to figure out how much you can invest. You could do this on your own or with the help of a financial advisor, who could help you set up an investment portfolio.
One benefit of managing your investments the old-fashioned way is that face-to-face interaction with an advisor. But having access to that kind of expertise can come at a hefty price , from five-figure account minimums to 1% or more annual management fees.
And where some see a hands-on approach to money management as an advantage, others might consider it a drawback—especially if willpower is a factor. While you may have a grand plan to put away a good chunk of your paycheck every month, life can sneak up on you. The fridge breaks, or you get a flat tire. When that money is right there, it might be difficult to send it to your advisor instead.
Automated Investing Basics
Simply put, automated investing refers to a computer program that manages a portfolio on your behalf with little to no human intervention and at a fraction of the fees that can come with live human advising. (Imagine someday saying, “Hey Siri®️, optimize my portfolio.”)
Getting started can be as simple as downloading an app, linking a bank account, and filling out some profile information—the automated aspects kick in from there.
If you’re open to working with either automated investing or doing it yourself, SoFi Invest®’s investing platform, offers both options: to either let the algorithm do all the heavy lifting or choose your own investments. In addition, it offers access to human financial advice—on the house.
For many people who otherwise wouldn’t have access to financial advising, the low overhead, fees, and minimum deposits of robo-advising have potentially opened the door for them to participate.
The Benefits of Automated Investing
Beyond opening the world of wealth management to a wider audience, automated investing comes with a variety of other benefits. First, it costs less than most traditional financial advice.
Old-school firms may charge 1% to 2% or more in annual fees, which could take quite a chunk out of your balance over time. But many automated programs have either lower fees, or none at all.
Ease of setup and management are other attractive features of automated investing. After creating an account and setting the desired risk level and goals, an algorithm invests the money into ETFs (exchange-traded funds), which are generally diversified, tax-efficient, low-cost funds. To make sure your money is always working hard, many automated advisors also offer periodic portfolio optimization and real-time updates on how you’re performing.
Another perk that’s less tangible is the potential to remove the emotions that can sometimes cloud judgment when making investment choices. When your funds are held in a computer-controlled environment, there’s less temptation to make changes to your portfolio based on the ups and downs of the stock market.
Often when you open an investment account, you set your risk tolerance up front. Once you’ve established that, you can set a threshold at which you want your account to be rebalanced. Accounts can be adjusted based on specified limits—without having to babysit it.
But while automated investing can be efficient and proficient (the algorithm for many of the bots was developed based on Nobel prize-winning research in economics), it is also impersonal. To reintroduce a bit of human touch, some institutions offer robo-advising as an added service to traditional advising.
And just like brick-and-mortar banks, not all automated advisors are created equally. While some charge reasonable fees, others may not. That’s why you might want to do your research, read reviews, and study the fine print to make sure there aren’t any hidden fees, such as hourly rates or percentage commissions.
The Human Element
An automated advisor can efficiently manage thousands of accounts at the same time, which would be much more difficult for a single advisor. But gut instinct and experience might still go a long way when it comes to working with people, and a financial advisor with both could be worth their weight in account fees.
And while automated investing might be great for those just starting out, the approach may not be holistic enough if one’s financial needs are very complex. Complicated discussions about estate planning , taxes, and insurance may still be better handled by a human financial planner, or other qualified professional.
Investing With SoFi
SoFi has developed a hybrid approach that combines the real-life advice of financial planners with the ease and lower cost of online investing and management.
SoFi financial advisors can help you through the legwork, such as setting goals and creating a portfolio that’s right for you, then automated investing technology can help manage your investments.
The minimum investment is just $1, and if you ever have questions or need advice along the way, you can ask a real, live person—without the fees of traditional wealth management.
Siri is a registered trademark of Apple Inc.
External Websites: The information and analysis provided through hyperlinks to third-party websites, while believed to be accurate, cannot be guaranteed by SoFi. Links are provided for informational purposes and should not be viewed as an endorsement.
SoFi Invest®
The information provided is not meant to provide investment or financial advice. Investment decisions should be based on an individual’s specific financial needs, goals and risk profile. SoFi can’t guarantee future financial performance. Advisory services offered through SoFi Wealth, LLC. SoFi Securities, LLC, member FINRA / SIPC . The umbrella term “SoFi Invest” refers to the three investment and trading platforms operated by Social Finance, Inc. and its affiliates (described below). Individual customer accounts may be subject to the terms applicable to one or more of the platforms below.
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