Let’s face it: investing can be intimidating.

Earning money takes time and hard work, so it’s natural to worry about losing it. Picking where to put each dollar can be difficult — and you may not feel equipped to make the decision.

As the media reports on daily market changes, you may feel even more uneasy. Or worse, you may opt out of investing altogether. But dodging the stock market could limit your money’s ability to grow over time.  

If you prefer to make fewer decisions, automated investing may be a good option.

A robo-advisor could do some of the heavy lifting, leaving you with more time for other priorities. Here’s how to figure out if automated investing is right for you.

What is Automated Investing?

Not everyone has the desire or budget for in-depth, comprehensive financial planning. If you only need investing guidance, consider the power of automation.

Becoming a savvy investor rarely happens overnight.

It’s easy to skip monthly deposits or spend your investment earnings. You may ignore the breakdown of your portfolio — even as it shifts from your original goals. Or, you may bypass opportunities to save on taxes.

Investing automation may help you reinforce smart money decisions.

A few clicks may set up automatic deposits or dividend reinvestments.

When you work with a robo-advisor, software picks your mix of investments — or asset allocation — based on your preferences.

Let’s say your robo-advisor chooses a portfolio of 80% stocks and 20% bonds. As the stock market goes up or down, the value of these investments may change.

As shifts happen, you may end up with 90% stocks and 10% bonds. Or, you may have 70% stocks and 30% bonds. Neither is “wrong,” but they no longer line up with your original allocation.

To get back on track, your robo-advisor can buy or sell investments on your behalf. The software can also look for ways to lower your tax bill.

These automated investing platforms are called robo-advisors.

If you want hands-off investing, robo-advisors could do the trick.

How Robo-Advisors Work

For most robo-advisors, the investing process begins with a questionnaire.

You may be asked if you are setting money aside for a specific goal or when you will need the money. Options could include building an emergency fund, buying a home, paying for college, saving for retirement, and more.

Next, you may be asked questions about your attitudes and behavior. How do you feel about major swings in the stock market? Are you comfortable with riskier investments? Or, do you prefer to play it safe with something more conservative?

Depending on your answers, the robo-advisor may suggest a specific mix of investments. These picks may automatically shift over time based on your goals and timeline.

A robo-advisor may also suggest how much to invest for each goal — with automatic deposits to keep you on track.

Robo-Advisors vs. Traditional Advisors

Robo-advisors and traditional advisors are vastly different — making them tough to compare.

Many traditional advisors focus on a lot more than investing. If you are looking for tax planning or insurance advice, a robo-advisor likely won’t be enough. But if investing alone is your priority, it’s much easier to see the distinctions.

Most robo-advisors follow a passive investing strategy.

This means your portfolio may be composed of index funds or exchange-traded funds (ETFs). These funds mirror a specific index — like the S&P 500, for example — vs. trying to beat the stock market. If the index goes up or down, you can expect your fund to follow. The benefits of passive investing may include diversification and low fees.

The goal of active investing, however, is to outperform these index benchmarks for a higher fee.

When the stock market goes up, active fund managers aim for higher returns. And when there is a downturn, they try to reduce losses.

Not all traditional advisors believe in active management. But those who do may build custom portfolios for their clients.

Still, outperforming the market can be difficult — even for experienced investors. For that reason, some folks stick with lower-cost passive investing.   

Make Better Money Decisions with Technology

One of the best ways to reach financial security is through years of consistent saving and investing. Often, getting started is the hardest part.

If you need help with investing — and don’t want a comprehensive financial plan — consider a robo-advisor.

The automation and hands-off approach may be exactly what you need to stay on track.

By relying on software, you may protect yourself from one of the biggest risks: your own emotional money decisions.

Put your money to work.

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