Robo Investing – A Year In Review


Investing, Resources, Strategy / Wednesday, March 18th, 2020

How It All Began

As I complete a year of my investment journey, I take a look at the rear view mirror to review 1 year of investing with a robo advisor for a beginner investor and just investing in general. It was back in Nov 2018 that I started thinking about investing. I had been reading all about the FIRE movement and saw how the money in my bank account was just languishing, perhaps even de-growing. But I couldn’t rationalise why I should be working so hard and not my money?! 

However,  I had a lot of doubts. Doubts about my investment knowledge, doubts about the timing of my investment decision with all the experts forecasting another recession and doubts if I even had enough spare cash to start investing regularly…  

And with so many investment products and solutions out there, each with their own unique jargon, it was beginning  to get quite overwhelming. I therefore decided to tackle this behemoth by first listing down my own ‘Investment Needs’. I needed something that would:

  • Let me invest small amounts of money regularly
  • Be able to develop an investment strategy for me and would not require much financial knowledge on my part
  • Help me make investing a habit
  • Not be too expensive

Considered Options

With those core Investment Needs in mind, I did  some market research and found out about three types of potential solutions:

Option 1: Investing directly through a broker in ETFs

Option 2: Robo investing / Robo advice solutions such as Stockspot and Sixpark among a few others

Option 3: Micro robo investing options which focus on investing spare change from daily spends such as Raiz

Investing directly through a broker would have required a lot of financial knowledge and research and I did not feel ready for that. Also, the brokerage costs were relatively higher and I would have had to invest large parcels of money to justify them so Option 1 was out. After a bit of digging around, I found out that micro robo investing options did not provide direct ownership of ETFs. The ETFs would have actually been held by the investment company, who in turn would have given me a percentage. While there is very little risk to such an arrangement especially when dealing with the more reputed investment companies, I did not want to take the risk, so Option 3 was also out. That meant Option 2 had come out on top.

The Winning Option

I looked at multiple robo investing solutions and ended up choosing Stockspot. Here’s why:

  1. Stockspot had a reasonably smaller barrier to entry at $2,000 compared to Six Park which was at $10,000.
  2. Stockspot’s brokerage costs start out at $5 per month until an invested amount of $10,000 is reached after which it is 0.055% per month of the invested amount for an invested amount upto $200,000. Whereas, Six Park’s charges a fee of $9.95 per month for amounts invested between $10,000 – $19,999 and then 0.05% per month until an invested amount of $200,000 is achieved. 
  3. Both StockSpot and Six Park offer direct ownership of shares, so they were both tied on this point

1 Year Of Investing

I started investing in Jan 2019. Coincidentally the market had had a big fall in Dec 2018. I was a bit anxious about the timing of investment, especially with all the forecasts of a recession hitting. But, with the small amounts I was starting out with, I didn’t really have too much to lose

Since then and up until Jan 2020, the markets have reached all-time highs and my overall returns have been in the range of ~9%. Although as of March, my portfolio was down -6.6%, all thanks to the global COVID-19 outbreak.

I have set up weekly debits from my bank account to Stockspot and whenever the minimum amount for investing is reached the money is automatically invested. This has helped me achieve the goal of investing regularly that I had set for myself.

1 Year Review of Robo Investor: Stockspot

Before I review the 1 year of investing with a robo investor specifically Stockspot let me answer one of the more import questions.

Would I recommend Stockspot to someone looking for such an investment solution? Yes, without a doubt. 

Considering my requirement Stockspot turned out to be the ideal platform. If I have to list out the pros and cons, the positives outnumber the negatives by a big margin. Here comes the pros and cons list.

Pros:

  1. Low initial barrier to entry – I started out at $2,000.
  2. Signup process was all digital and took only about 3 to 4 days.
  3. The support is responsive and generally replies within a day, don’t remember them having taken more time than that under normal circumstances.
  4. Communication is timely and not overwhelming. The newsletters are informative.
  5. Helps with tax filings as well.
  6. Direct ownership of assets under your own HNI.
  7. The user interface for both the app and the website is easy to follow and use.
  8. Can change the investment strategy anytime.
  9. Can move out of the platform anytime without any fees.
  10. A good introduction to asset allocation and portfolio construction along with keeping an investor updated about which ETFs the next investment will flow in.
  11. Provide a detailed ETF distributions calendar so you know when to expect dividends, etc.

Cons:

  1. Doesn’t provide a detailed calendar of future investments only those about the next investment. A detailed calendar would help in understanding where the portfolio is headed. Also, for someone who is looking to learn portfolio construction and balancing it would be a good learning resource.
  2. The fees are a percentage of the portfolio value and not a fixed amount. So, the more I invest, the more fees I would have to pay on a monthly basis. Therefore after hitting a high enough portfolio value, the fees for some other products such as an online broker would start to look much more attractive. That’s what I intend to do as soon as I hit the $20,000 mark in invested value. 

So, yeah like I said the pros win at the moment. 

Onwards and Upwards

With somewhat of an investing experience under my belt, I now feel a bit more confident. The ease of investing with Stockspot helped me get started. In the process I overcame quite a few mental barriers that I had when I started considering investing for the first time. And I also got to learn quite a bit about portfolio construction and management.

During 2020, I intend to continue the investing habit and when the time comes, grow to become a direct investor. The primary motivation of that move will be to stay aligned with my initial goal of keeping the investment costs low. But I do believe that overall too it would be the right trajectory for me or for any other novice investor like me to follow.

Mr. Fireball

2 Replies to “Robo Investing – A Year In Review”

  1. I too enjoyed my first experience with robo-advisors. They get a lot of flack for relatively high expense ratios, but they are a fabulous way to dip your toes in the stock market as a newbie. Getting used to volatility with small sums of money and the pure ease of setting up an account and starting are massive pros for young wannabe investors. They avoid the risk of putting off starting investing for years due to lack of knowledge or fear. I

    1. Hi Aussie Doc. Thanks for your comment. Can’t agree with you more. That’s how we started before finding more courage for self-directed investments. And now we do both.

Leave a Reply

Your email address will not be published. Required fields are marked *