What is Automated Investing?

Automated investing is a form of portfolio management that uses algorithms to automatically manage your investments. Designed for hands-off, long-term investing, it typically comes with lower fees compared to mutual funds. Automated portfolios are usually diversified and aligned with your investment objectives and risk tolerance. Though relatively new, automated investing has gained traction due to its simplicity and cost efficiency.

Why is Automated Investing Useful?

At its core, automated investing is the practice of systematically transferring some money from your checking or savings account into your brokerage and that deposit will automatically be allocated and invested into a portfolio in which you previously enrolled. Automated investing is a form of passive investing, which is used to build long-term, low-touch strategies.

For instance, many financial institutions enable you to automatically transfer a set amount, say $300 monthly, from your savings into an investment account. This process itself is a basic form of automated investing, as a digital system manages the transfer with the intent of growing your wealth.

Once the funds are in your account, they can be invested through various automated methods. Some brokerage firms offer algorithm-driven systems that can buy or sell assets based on pre-set conditions. For example, you could set a rule to buy or sell a stock if it crosses a certain price boundary.

Another approach allows the system to invest your deposited funds as soon as they’re available. For instance, that same $300 deposit could automatically trigger a buy order for different securities based on predetermined amounts or percentages. This enables a balanced investment approach without requiring you to actively manage the process, saving you time and simplifying your investment efforts.

Automated investing provides a disciplined, cost-efficient way to create and grow a long-term, diversified portfolio. This tool has been successful due to its ability to automate tasks that generally involve several steps and a significant amount of monitoring.

Automate Your Investments with Webull Smart Advisor

Similar to a mutual fund or an ETF, Webull Smart Advisor is a type of passive investment. Smart Advisor is a robo-advisor that manages your investments using an algorithm, with no human involvement.

With Smart Advisor, you can set your investment goals by answering a series of questions about your risk tolerance, time horizon, and expected returns. Based on your responses, you'll receive a customized portfolio to kickstart your investment journey.

Robo-advisors typically invest in a diversified selection of ETFs, representing various market sectors and asset classes. The system continuously rebalances your portfolio based on your preferences using algorithmic controls. If your financial situation changes or you decide on a new investment strategy, you can adjust your settings, and the system will realign your portfolio to match your updated goals.

Smart Advisor charges a 0.20% per year fee to investand monitor your portfolio. This is a cost-effective solution to create a diversified, well-indexed portfolio, that can provide the proper foundation for long-term investing. This cost is typically lower than actively managed mutual funds, as well as what financial advisors would charge to manage your assets. This makes it a cost-effective solution, particularly for novice investors who may not have a deep understanding of portfolio management.

Smart Advisor has a low minimum investment of $100 as well, so the first step in beginning your long-term investment journey does not require a large amount of cash. From there, Smart Advisor spreads your funds across multiple asset classes, reducing the emotional impact of market volatility. Additionally, the platform offers tax-efficient portfolio rebalancing through tax-loss harvesting, which helps minimize taxes on your investment gains. It also allows you to invest using Dollar-Cost Averaging, further reducing the risks associated with market timing during periods of volatility.

Considerations

While automated investing has numerous benefits, there are important factors to consider before enrolling. You must be comfortable with taking a hands-off approach to managing at least a portion of your portfolio. Automated investing platforms like Smart Advisor typically do not allow for individual stock selection, so if you have specific investment strategies in mind, you may need to manage those through a separate, self-directed account.

Also, robo-advisors do not offer any personal advice, and the portfolio will be more generalized than it would be if you were getting the help of a financial advisor. If you have specific questions or specialized needs, you may want to consult with an advisor, as human interaction would be more personalized.

The Bottom Line

Automated investing is a great tool that allows you to set up scheduled investment transactions without needing to manually repeat steps. From a simple buy order, all the way up to fully automated portfolios like Smart Advisor, it has changed the way that you can invest for the long-term in a disciplined, cost-effective manner.

Head to Webull Learn to gain more knowledge on Stocks, Options, ETFs, and more. Webull is committed to providing you with comprehensive, easy-to-understand educational resources to help you make informed investment decisions and build your financial future with confidence.