So, you’ve made the decision to use a webapp to manage your money. Congratulations! People who make this choice usually spend their time and money efficiently and using such a platform will allow you to do this. But in order to get the most value for your time and money invested, there are 3 essential things you should know about how to start investing with a roboadvisor.

Step #1: Picking the right digital advisor

If you’re wondering how to start investing with a roboadvisor, know that much of your success will be predicated on the choice of platform that you make. Many digital platforms are similar, but they aren’t completely the same. Recognize the critical differences that may not seem like they matter, but do in fact create different experiences over time. Here are some examples.

    Fees. They add up very quickly. Did you benchmark your fees to the industry average? If they are higher, do you feel the increase is warranted?

    Scope and Depth of Services. Some digital platforms are just going to manage your money. Period. Others may provide financial planning through a human team of specialists that you may have opted to have access to. Are you really getting what you feel you’ll need, or are there extra services bundled into the offering that you don’t want to pay for?

    Selection of Funds. Unfortunately it’s not always the best funds that wind up as your investment options. Conflicts of interest may prevail, causing the platform to offer funds that reward them with a split of the proceeds. Additionally you want to be sure that the platform offers a wide variety of asset classes and is open to refreshing their investment choices as the market evolves. You want a platform that will grow with you in the long term, not one that will be static and limited in the face of change.

    Investor Size. While many digital platforms will say that they deliver the same service regardless of how much money you have invested, this isn’t always true. There may be fee efficiencies that larger portfolios benefit from; in this case if your portfolio is on the small end, you are essentially paying for other people’s service! Ask yourself if you are getting a fair deal in relation to other investors who are using the same platform. Who does it seem that this service was really designed for?

    Onboarding and User eXperience (UX). Some platforms will require you to operate independently, while others offer more “hand holding.” If you aren’t the DIY type, you may need to opt for a platform with a strong UX and a robust customer service.

Step #2: Prepare your onboarding / Signup

Know this about how to start investing with a roboadvisor: you want to do it right on the first try. There is a certain amount of information you’ll have to gather prior to starting up. Being disorganized will create frustration in the beginning and may leave you with a bad impression of the platform or of digital investing in general.

Create an onboarding strategy first. You can do this by sitting down and mapping out your goals for the next 20 years. You may want to take an inventory of your assets and liabilities, financial statements, as well as your current income, income history, and tax returns. Use all of this to compose a financial profile for yourself.

Next, make sure you take some time to understand how the webapp works. Some platforms are more intuitive than others. You may have to take some time learning about how to navigate the webapp software. This will reduce frustration and help you to get the most out of the fee you are paying to use the webapp.

Step #3: Money allocation and Risk tolerance

The 2 essential things you’ll need before you turn the key in the ignition are the amount of money you want to start with and your risk tolerance. Before you portion off a hunk of cash and press “invest”, make sure you can afford to live without this money. Do you have an emergency fund of 6 to 12 months set up so that in case something catastrophic happens you can survive? There’s emergency money and then there is investment money. Make sure you have enough saved for a rainy day!

You also want to make sure you get an accurate understanding of how much risk you can take. Your online application may have a questionnaire that you will answer to determine which risk category you fall into. If it does not, conduct an evaluation on your own. Investing too aggressively can lead to surprises that you may not welcome when the market drops. Investing too conservatively may lead you to fail to reach your long term goals. It’s a good idea to get a sense of how much money you can stand to lose, in dollar terms, and then align that with what the likely risk level is that you will be taking on in your portfolio.

Last words on how to start investing with a roboadvisor

In our experience, we’ve seen people have the best experiences investing with a roboadvisor when they go about it logically and systematically. It all starts with picking the right roboadvisor. You then have to organize your finances and strategize on a few key important items.

We think we got it all covered…but we may have left something out. Let us know – what are your questions? Are you struggling to find the right match, or is it just a question of getting started on the right foot once you join a platform? Click here to give us a try and see how we can be your roboadvisor platform.