Stock Robots or Humans? Which is the Best?
How will you feel when you discover that the one writing this article is a robot? Perhaps, you will be surprised. In this digital world, the use of robots is growing fast. But in the finance world, should we trust stock robots or cling to the traditional method which is to have a human financial advisor?
According to Forbes, more and more companies are using robots to lower the production cost, increase efficiency, and improve productivity.
Many experts predict that in the future these robots will replace humans. Therefore, a lot of people will lose their jobs. However, some also forecast that many jobs will be created even these robots exist. In fact, it will provide a high paying job, but requires high-quality skills. This sounds terrifying, but this is the reality, which we must accept. Instead of resisting to these changes, why shouldn’t we embrace it and be prepared for it?
This is the same in the field of investing. PricewaterhouseCoopers said that the use of robotic process automation is not new. It existed a decade ago, but they are growing in advance quickly. Insurance companies have been using the robotic process automation in processing claims. Robo-advisers are also available to provide automated, algorithm-driven financial planning services.
This is the same in the field of investing.
PricewaterhouseCoopers said that the use of robotic process automation is not new. It existed a decade ago, but they are growing in advance quickly. Insurance companies have been using the robotic process automation in processing claims. Robo-advisers are also available to provide automated, algorithm-driven financial planning services.
What is a stock robot?
- Stock robots use algorithms to suggest stocks to investors. This means that if this continues, this will eventually replace the human financial advisers. This can be accessed online or by using an app. Its goal is to have less interaction with humans.
How it is used?
- There are 3 steps. Initially, the investor will be screened to determine the risk-return profile. Second, the stock robot will follow the investment strategies and invest the money to the right stocks based on the clients’ profile. The third step is that they will monitor and evaluate the investment and make necessary adjustments.
Why choose stock robots over human financial adviser?
It is cheaper. In the US, it just costs between 0.15% and 0.67% of your investment. In Europe, it only costs 0.8% on average unlike with financial advisers that cost 1%. One thing great about it is that it can be accessed by anyone who has an income and savings because it doesn’t have a minimum investment.
It provides diversified and low-cost investment solutions. Some of the robo-advisors mainly invest in exchange-traded funds. These are financial assets that are arranged to monitor and match the returns of reference entities like the market index. This is also less expensive to implement unlike the other types of investment.
The stock picking robots are also capable of handling complicated things because it is operated with artificial intelligence. It is just surprising that experts predict that millenials will most likely use this because they prefer self-serve products. However, it is found out that even those in their mid-40s are using the bots. Some also concluded that this will be chosen by less educated people. Surprisingly, a lot of educated people prefer to use this than to hire a financial adviser.
What are the risks?
Like any innovation, it comes with a risk. In stock picking robots, they cannot give you advice or guide unlike with financial advisor. A financial advisor can also make you financially literate which is one of the keys to a successful investment. Aside from that, you need to study stock picking robot carefully. It requires knowledge and skills to operate it successfully.
Lastly, although the stock picking robots are growing popularly, financial literacy is still important. But you can use both the system and human expertise. In this way, you will make the best investment possible.