Those of you who are looking for ways to invest money in Canada have many options to do this. The most common way, if slightly old-fashioned, is to open a saving account in one of the Canadian banks and wait until the amount you put there becomes larger. Or you may take a more up-to-date approach to investing and, as many people do now, start investing online. This article explains in detail how to invest money in Canada with the help of the latest technology. We are focusing on the benefits of robo-advisors, what this software is and how it helps plan your finances and reach your financial goals.
The newest technology can be useful for people trying to solve different financial problems. If you do not have time or patience to manage your savings, the robo-advisor can be a good solution, since it will obligingly do the job for you. If you are a first-timer and have never invested money before, the robo-advisor will come equally handy. It possesses expertise that would take you decades to acquire, thereby offering you a short-cut to financial security. And if you have succumbed to the ravages of debt, the robo-advisor will lend you a helping hand and will assuage your financial worries, giving you much-needed peace of mind. What is also particularly attractive about robo-advisors is that you do not need to have a large amount of money to start using their services. This specimen of financial technology is much cheaper than any human financial advisor, though the assistance it is able to render is no less valuable and profitable.
The robo-advisor is an investment platform. As its name suggests, it advises users how to invest and analyzes their financial situation with the help of cutting-edge technology. If you want to activate the robo-advisor, you need to take several easy steps. First, you will be asked to fill out your personal details and indicate what financial aims you would like to achieve. You will also need to define your risk tolerance, which is the degree of variability in investment returns that you can withstand.
When you have filled out all required information, the robo-advisor will create your portfolio. The most attractive feature of robo-advisors is that your attention to your investment is not necessary. The software will manage your money single-handedly, always checking whether your financial goals can be achieved and whether your portfolio is aligned with them. You may stay assured that your money will be put to good use, because all robo-advisors employ the most advance algorithm to manage your funds and rebalance your portfolio, when needed. Another service the software provides is tax harvesting to reduce your liability to the Internal Revenue Services (IRS). That is to say, the robo-advisor will sell those securities that went down. By doing this, it will offset taxes both on your income and your gains. After selling the securities that had suffered loss, the robo-advisor will replace them with another security. This will help you keep the best asset allocation.
The robo-advisor also takes human factors – people’s emotions, ambitions, drives, and behavior - out of the equation. Being a robot, it is not influenced by feelings and thus successfully protects people against mistakes that can precipitate their financial ruin. The problem is that people often behave emotionally when investing. They either make financial decisions on impulse or, blinded by the prospects of immediate monetary gains, cannot stay composed when markets suddenly climb high or plunge.
Some people even listen to their intuition when deciding how to invest. While spiritual people would tell you that the human intuition is connected to the wisdom of the Universe and, therefore, is more authoritative than reason nested in the closed space of our heads, the sixth sense is not a reliable guide to your financial prosperity. Relying on your gut feeling instead of deep knowledge of the market and precise calculations will only endanger your finances. The robo-advisor cannot, of course, be swayed by cognitive biases and passions and thus manages people’s assets more effectively than people do themselves. When you entrust your money to the robot, you may feel confident that it will handle it rationally and in keeping with your best financial interests.
Robo-advisors are also attractive because they are cheap, costing only $100-150 dollars. Additional service fees that you will need to pay are relatively low as well. Usually, all extra fees are calculated as a percentage of your assets, though some companies determine your fees in advance. The price of any fixed fee will depend on the size of your portfolio, ranging from $20 to $200 a month. When you pay your fees as a percentage of your assets, the price may be from 15 to 50 percent of the size of your account. Your initial investment with robo-advisors is also small. In contrast to human financial advisors who might require you to invest $100,000 for starters, with the software, $500 will be sufficient as initial investment.
If you think that managing your investments with the help of the software is a good idea, you can purchase any of the five robo-advisors considered the best in Canada: Wealthsimple, Nest Wealth, ModernAdvisor, Justwealth, and WealthBar. All these Canadian robo-advisors come with low costs and can help you successfully reach your long-term financial goals.