The Robo-Advisor concept is relatively new to the mainstream investment crowd. The product is applicable across many demographics spanning different age, wealth, income, and financial goal categories. In essence, Robo-Advisors are to the advisory business what ETF’s are to the fund business.* In other words, the product is a disruption to the traditional asset management industry and is worthy of consideration for your investment plan. To begin, a Robo-Advisor is a passive investment management strategy that employs ETF’s to build a portfolio based on Modern Portfolio Theory (MPT). MPT originated from the research of Harry Markowitz. His paper’s premise suggest that investors can tailor a portfolio of investments based on their risk tolerance, therefore implying that assuming some risk is an inevitable part of investing. While risk is inevitable, that risk can be mitigated through diversifying one’s holdings in a portfolio. Markowitz’s work implies that building an efficient portf...
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