Chances are you’ve seen the term “tax loss harvesting” if you’ve read about popular robo advisors such as Wealthfront and Betterment. Both of these services offer it as a feature. But what exactly is tax loss harvesting, or TLH, and how can it help your investment portfolio?
Robo advisors came onto the investment scene less than a decade ago, but you can already see the effects sweeping through the industry. For investors, robo advisors are changing your investment options, fees and how you interact with investment services. Here are five notable ways robo advisors are changing the industry.
Let’s face it: A lot of us just don’t have enough money. A recent survey by Bankrate revealed that only 39% of Americans have enough in the kitty to cover a $1,000 emergency. Clearly, we need to grow our wealth — and ideally, through investing. But why should we go broke trying to do so?
Thanks to the rise of robo advisors, investing for the future is now more accessible than ever. You don’t have to spend a lot of time or money hiring a financial advisor to create a complicated asset allocation to receive the best returns possible. Robo advisors now have the technology and computer software to do this for you — all at a lower annual fee.
Back in 1952, long before everyone and their mother could discuss the benefits of adopting a holistic approach to their personal health, economist Harry Markowitz introduced theory recommending a holistic approach to one’s financial health. Known as Modern Portfolio Theory (MPT), it’s just as popular today as it was back in 1990, when it won Markowitz a Nobel Prize.
Wealthfront is one of the more popular robo advisors that we’ve reviewed. It’s similar to Betterment, both of which allow automated investing and financial guidance for individuals at little to no cost. With this exclusive Investor Junkie promotion, the first $5,000 in your account is managed for free, with any amount above $5,000 having an annual fee of just 0.25%.
There’s been a lot of buzz about the rise of robo advisors lately. These are companies that aim to help investors put assets to work on their behalf with the help of algorithms. Using some pre-set equations, based on certain assumptions, robo advisors can provide you with an investing plan that’s meant to prepare for long-term goals. Some robo advisors, like Betterment, will even change your asset allocation automatically, based on algorithms set using Modern Portfolio Theory.