4 unsung benefits of robo-advisors

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These automated investment tools have several features that you should know about.


Key points

  • Robo-advisors can build and rebalance an investment portfolio for you.
  • Most of them also have other useful features, such as helping you save on taxes.
  • You can also choose socially responsible investments and get a line of credit on your portfolio.

For novice and hands-off investors, robo-advisors are a popular choice. Many online stock brokers have robo-advisors available, which determine how to invest your money based on the information you provide about your goals and risk tolerance. They also tend to cost a lot less than traditional human advisors.

Although many investors know the basics of this best robo-advisors offer, there are also advantages that are not known to everyone. If you’re not sure about using a robo-advisor, here are four little-known benefits they can offer.

1. Tax loss harvesting

Several robo-advisors offer tax-loss harvest to help you reduce your tax bill. The basic idea behind tax loss harvesting is that you sell losing investments to lock in capital losses that you can include on your tax return.

You then use those capital losses to offset your capital gains, and if you have any remaining losses, you can apply up to $3,000 a year against other forms of income. It is one of the few the silver linings of a falling market.

Robo-advisors with this feature manage the collection of tax losses for you. After selling a losing investment, the robo-advisor can also reinvest in a similar fund. This way, you can deduct the losses on your taxes, and since you have a similar investment, you can still profit from it if its value increases later.

2. Socially Responsible Investing

Socially responsible investing has become a hot topic in recent years. Many investors want to use their money to support companies that match their values.

To better serve these investors, some robo-advisors offer socially responsible portfolio options. These portfolios generally avoid companies considered irresponsible due to social or environmental issues. They focus on investing in companies known to have a positive impact.

3. A line of credit on your account

One of the most unique benefits available with some robo-advisors is the ability to borrow against your account. If you meet the minimum requirements with a platform that offers this feature, you can get a line of credit up to a certain percentage of your portfolio value. For example, if you have a $50,000 portfolio, you might be able to get a $10,000 or $15,000 line of credit.

If you need to borrow money, this can be a convenient option. There are a few advantages to borrowing from your investment account instead of getting a loan:

  • There is usually no Credit check borrow against your investments.
  • Interest rates tend to be lower than personal loan ratesince your investments serve as collateral.
  • You can borrow from a credit line several times if necessary.

4. Access to human advisors

Robo-advisors are useful for building and rebalancing an investment portfolio. They can handle many of the same things that human financial advisors do for you, and at a lower cost. But in some situations, you might need advice that a machine can’t give you.

Fortunately, it’s not always a situation or situation. There are many robo-advisors that also offer access to human financial advisors when needed. They usually charge a bit more for this, either through a premium plan or with consulting fees. If you have complex financial issues to manage, such as balancing short-term home savings goals with long-term goals retirement planningso talking to a financial adviser might be worth it.

Robo-advisors can do more than just create a portfolio with the right mix of stocks and bonds. If you don’t want to spend too much time managing your brokerage account, a robo-advisor could be a great way to achieve your investment goals.

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