Robo-Advisor Vs. Self-Management: Which Option Works Best For Your Portfolio?

Smart management of your investment portfolio can pay big dividends, especially if you're looking forward to a comfortable retirement or a comfortable nest egg for a rainy day. You can hire a financial advisor to help manage your assets, but there are plenty of other options for getting the best returns possible. Many savvy investors are choosing to manage their own portfolios, while others are taking advantage of the latest in automated investment services.

The following article takes a look at the benefits and drawbacks of letting a robo-advisor manage your portfolio versus managing your assets on your own.

Pros and Cons of Managing Your Own Investments

Managing your own investment portfolio gives you a greater ability to fine-tune your portfolio based on your risk tolerance. For instance, you can select aggressive stocks and funds if you're looking for fast return on your investment. Another benefit of managing your own portfolio is that you can avoid paying the steep commission fees that are common with certain brokers.

Unfortunately, managing your own investment portfolio can seem daunting if you don't have much financial experience. One particular pitfall of managing your own investments involves grappling with the notoriously complex tax liabilities. In many cases, you can have a financial advisor step in to guide you through the sizable tax implications for a small fee.

Pros and Cons of Robo-Advisors

Not everyone wants to manage their own investments. Many investors are looking for an easier and inexpensive way to watch their portfolios grow, so automated investment services are gaining popularity. These robo-advisors utilize complex software to manage client accounts. Robo-advisor services typically offer lower minimum investment amounts

Another benefit of using robo-advisor services involves taking advantage of some of the unique strategies and programs that are usually offered. For instance, some robo-advisor firms offer tax-loss harvesting, a technique that lets you strategically sell off underperforming stocks and replace them with similar stocks for greater incremental tax savings.

The downside of a robo-managed portfolio is that the investment picks chosen by robo-advisors tend to be rather conservative in nature. Since robo-advisors are meant to appeal to a broad range of investors, their subsequent portfolio choices are sound but designed around generating the lowest level of risk possible. If you're looking to generate a larger return on your investment, use these tips or consult with a financial advisor such as State Bank of Cross Plains.