Should You Invest for Retirement Online? Compare Some Options!

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More older adults are taking wealth management into their own hands by using online tools instead of a traditional financial advisor. Is online investing a good idea?

Today, 49% of investors in their 50s and 40% of those in their 60s indicate they are “self-directed,” meaning they make their own investment decisions. Most of these investors use online resources like a discount brokerage, according to a first quarter report from research firm Cerulli Associates Inc. Popular discount brokerages include Charles Schwab and Etrade. These services allow an investor to make their own decisions and buy and sell stocks and other assets at a relatively low fee.

Online automated financial advisors (services that provide automated advice) are another type of online investment resource that is growing in popularity.

Betterment, an online financial advisor told Investment News that those over 50 years old account for roughly 20% of the $550 million in assets it manages. While not for every investor, deciding to take the management of your own investments online can make a lot of sense.

Here are four reasons you might want to join other online investors:

1. New online tools cut traditional fees while providing expert advice

The rise of online tools to help individuals manage their investments digitally is making way for new cost structures.

Companies like Wealthfront, JemStep and Betterment automate the portfolio construction and rebalancing process – they use computer models to automatically buy and sell. You just put your money in, answer a few questions and let the computers make decisions. As a result, you get the type of advice that you could get from an investment advisor at a low cost or free.

Take Wealthfront, for example, which launched in 2011 and now has more than $1 billion in assets under management. Wealthfront cuts commission fees entirely. Its clients pay an annual advisory fee of 0.25% of invested assets above $10,000 rather than commission fees paid to live advisors as was done the past.

For invested assets under $10,000, the service is free.

Get Matched to the Right Investment Service for Your Needs.

2. It’s more convenient

The ability to manage your own investments can save time and doesn’t even require you to leave your home. While people’s schedules and preferences vary, the ability to control investments at your convenience may be appealing.

“It varies by the individual person,” Scott B. Smith, director at Cerulli and one of the investor report’s authors, told Investment News in a recent article. “I’m in the middle of this myself. I’m 41 and can’t imagine taking three hours out of my day every quarter to meet with an adviser. The in-person meeting is more of an onus than a bonus.”

You may still face a transaction fee, but you’ll save the time of having to make a phone call when you want to execute a financial decision.

3. You Are in Control and Investing Can Be Fun

Many people love learning about finance and researching investments online. And whether or not you are profitable, knowing that you are responsible for your money can be highly satisfying.

4. It takes the paper out of the process

With most financial institutions offering the option to “go paperless,” online investment management hubs like Personal Capital allow investors to keep all of their financial information in one place.

Rather than having to keep track of piles of paper from banks and investment firms, new tools allow users to access all of their information in one place. If you’re finding it harder to keep track of your investment documents, harder to get a live voice on the phone or more difficult to navigate the online access points of your financial institution, you may want to consider one of the new alternatives that offers a streamlined approach—all on a single dashboard.

What Should You Do?

While there are many reasons you might consider investing online, there are also some pretty good reasons for seeking financial advice from a professional advisor. Most lives are complicated and financial management means more than just investments. Taxes, estate planning, income planning and insurance are all issues related to investments that a professional advisor can help you navigate and optimize. And best of all, an advisor offers the comfort of someone to talk to! Computers don’t quite do that… yet…•

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