Crypto robo-advisors are gaining popularity, especially in the conservative and long-term investor communities. This is mostly because they allow you to make investments with relatively low starting capital and charge little for management fees.
So, if you’re looking to start using a robo-advisor, this article is a comprehensive guide to get you started.
What is a robo-advisor?
A robo-advisor is an automated computer program that helps you manage your investment portfolio. It uses artificial intelligence to analyze a specific financial market to find investment opportunities for you.
Typically, robo-advisors select financial assets for your investment portfolio based on your capital size, risk appetite, and investment duration. Although they cannot be as discerning as expert human investment advisors, they have the advantage of emotionless and advanced artificial intelligence-based analysis.
Furthermore, they’re usually cheaper to acquire/hire than human advisors. Still, they are very mechanical and aren’t a complete replacement for human experts.
What are Crypto robo-advisors
Crypto robo-advisors are those that work in the crypto markets. When connected to your wallet, they can help you customize your crypto investment portfolio to make profits from increasing prices in the long run.
Crypto robo-advisors use a combination of algorithmic methods and sentiment analysis to determine the potential of specific crypto assets before adding them to your portfolio. So, in addition to using specific technical indicators, they perform fundamental and on-chain analysis before deciding to invest in a token.
Moreover, crypto robo-advisors tend to invest in various crypto assets ranging from cryptocurrencies to NFTs, blockchain, and dApp utility tokens. However, the kind of assets they select for investment depends on your risk appetite.
These robo-advisors get a decent grasp of your risk appetite from a questionnaire or a personalized consultancy call. Your data lets them know whether you’re a conservative investor more suited for relatively stable tokens or a risk-taker willing to take a chance on volatile cryptocurrencies.
One important thing to note is that crypto robo-advisors are not the same as crypto trading bots. While their underlying technology may be similar, they perform different functions. Crypto robo-advisors analyze the market for investing opportunities based on your risk-appetite. They then buy crypto assets, adding them to your portfolio for a relatively long period.
Crypto trading bots, on the other hand, actively buy and sell cryptocurrencies within a shorter time frame to make profits. So, you can use them to scalp trade, swing trade, and trade futures, unlike robo-advisors.
Are robo-advisors Accurate?
A robo-advisor is just as accurate as a human using a strict algorithm. They use specific parameters to determine if a crypto asset is worth investing in for a certain period. These parameters include real-world application, trading volume, and a variety of other coin-specific and market data.
However, the crypto market is often very volatile, and sometimes the cryptocurrencies may underperform. Luckily, robo-advisors constantly monitor and adjust your portfolio to ensure that you make the most of your long-term investment.
So, if you ever wonder whether robo-advisors beat the market, it’s best to understand that how well a crypto robo-advisor performs depends primarily on its volatility.
Benefits of using crypto robo-advisors
Aside from the advantage of convenience as robo-advisors automate your crypto investment process, here are other benefits of using them.
- Low starting capital: One advantage of robo-advisors is that you can start investing using relatively low capital. On the other hand, human advisors typically require you to have a reasonable amount of capital, say at least $5000 and upwards, before giving you investing recommendations.
- Diversification: In addition, crypto robo-advisors help you diversify your investment portfolio, distributing your funds to several projects with a decent chance of booming.
- Lower cost: Crypto robo-advisors cost less than human advisors. Annual management fees can be as little as and much lower than 1% of your assets under management.
Cons of using crypto robo-advisors
One major disadvantage of crypto robo-advisors is that they depend on their provider’s servers to run, so if they get hacked or the servers fail, you risk losing your funds and data. Here are some other cons.
- Customization problems: While robo-advisors can match your risk appetite and do an excellent job of aligning with your investment goals, they may not allow you to tweak your investment portfolio to your tastes as much as you would with a human advisor.
- Limited investment options: Some crypto robo-advisors may support only a limited range of crypto assets. So, it may not include some newly launched utility tokens from unpopular projects, limiting your investment opportunities.
How To Select A Crypto robo-advisor
To select a crypto robo-advisor, here are some things you should consider:
Reputation of the provider
When selecting a crypto robo-advisor, consider the reputation of the company providing the bot. Have they experienced data privacy and security issues in the past? Check for providers with genuine and overall positive reviews.
It’s best to pick a robo-advisor compatible with a wide range of cryptocurrencies. This will enable you to generate revenue from even the most obscure, promising assets.
Ease of use
Go for a robo-advisor with a user interface you can easily navigate and has all the necessary functions. This will help you effortlessly monitor your portfolio’s performance and adjust your strategy if need be.
The historical performance of a robo-advisor is something you should consider as well. Check the average ROI the advisor has helped users generate over time. This should give you an estimate of the interest to expect under favorable conditions.
Weigh your options to see which robo-advisor has the best value for money.
Top 3 Crypto robo-advisors
From our experience, here are our top three crypto robo-advisor recommendations.
CryptoSimple is a robo-advisor platform that simplifies the process of investing in cryptocurrencies. It has a range of investment options from conservative to risky, with a thoughtful curation of stablecoins and altcoins for each. CryptoSimple allows for direct fiat deposit, which makes it a great option for newbies.
Depending on the option you pick, their monthly fees range from 0.15% to 0.11% of your portfolio managed, which is pretty decent.
Betterment is a top-rated robo-advisor platform offering investment opportunities for various financial assets. These assets range from ETFs to stocks, bonds, and, of course, cryptocurrencies and blockchain tokens.
They also offer services such as paid investment consultations, tax management, and guided investments. Their base management fee is 1%, but other services included could cost you a little more.
If you’re looking to start investing with as little as $500, Titan is a great robo-advisor to consider. Once you sign up for the service, they book you a free consultation. After this, you can subscribe to any of the investment bundles.
Although they have a wide variety of stocks and bond options to choose from they, sadly, only include Bitcoin and Ethereum in their crypto investment package. Don’t get us wrong, these aren’t bad investments, but they can be rather slow if you prefer “riskier” options.
Titan’s fees start at 0.9% annually.
Robo-advisors offer a great opportunity for long-term investors to make the most from their financial assets. So, this article has exhaustively covered the basics of robo-advisors, their benefits, and how to select the best ones.
Hopefully, the information we’ve provided can help you begin your crypto investment journey with the right advisor.
Is robo-advisor a good investment?
Using robo-advisors for investing is a good idea. They don’t require as much capital as human advisors and cost much less as well. This makes them a great option for beginner investors.
Are robo-advisors safe?
Quality robo-advisors are safe. But check if a robo-advisor has been certified by relevant regulatory bodies and has garnered good reviews before using them for investments.
Do robo-advisors beat the market?
Most robo-advisors typically offer a fixed APR, so they technically beat the market. Still, volatile market conditions can be terrible for your investment portfolio. So, make sure to pick a robo-advisor that enables you to adjust your capital allocation when necessary.