What’s the next step after robo-advisors?

What's next after roboadvisors?

You’ve successfully started your investment journey with a robo-advisor and you’re feeling pretty good. You’ve set your risk tolerance, found a portfolio that meets your needs and goals, and have set up a regular monthly contribution amount that fits your budget. Time to pat yourself on the back for taking this giant step towards your financial future.

Now that you’ve tackled this major money hurdle, it’s time to start thinking about what’s next when it comes to managing your money. How do you diversify your wealth from here? What areas of your financial plan need your attention? These are tricky questions with no single right answer. Staying focused on your financial and lifestyle goals can help you figure out what’s next as you continue to grow your wealth.

Stay focused

A few years ago, robo-advisors arrived on the scene and they’ve been shaking up how people invest ever since. Robo-advisors have made investing easy and approachable for those who were fearful of investing. With that said, even though a robo-advisor can make you feel like your investing activity is on autopilot, I think it’s a great idea to stay on top of your account and not just let it sail. It’s your money.

Here are a few considerations that could help you stay focused on your investing goals.

What are the fees? How much is the robo-advisor charging you to use their platform and are there any other investment fees? If you can’t easily find this information online, contact your robo-advisor and ask for a detailed list of fees for your account. Fees are a necessary part of investing; however, high fees ultimately drag down the performance of your account.

What is your annual return? You should be able to log in or check your statements to see the annual return on your investment account, which is a measurement of success. Your annual return will vary depending on the performance of the funds you’ve chosen to invest in, which should align with your risk tolerance (how much risk you’re willing to take on). The investment markets ebb and flow every day and it’s easy to get swept up into the news of market declines. However, you don’t need to panic. Stay true to your investing strategy and check your annual return once a year to see if you need to make any changes.

Did your risk tolerance change? You’ll hear “risk tolerance” repeated over and over again because it’s such an important piece of your investment strategy. Most robo-advisors offer different investment portfolios based on your risk tolerance. How risky you decided to be last year doesn’t have to match the risk you want to take on now. Feel free to adjust your portfolio so that it matches your current risk tolerance and don’t be afraid to make changes from time to time.

Is your portfolio balanced? For most investors, your portfolio selection is made up of different types of investments to match your risk tolerance. You’ve probably heard of the popular 60/40 investment split (meaning 60% of your investment dollars are in stock funds and 40% of your investment dollars are in bond funds). Your investments could be split along different lines, depending on your risk tolerance and portfolio options. Make sure as you invest each month that your portfolio stays balanced to match your ideal investment split based on the amount of risk you’re comfortable with. As the markets rise and fall, your ideal mix of stocks vs. bonds can also shift from time to time leaving your portfolio out of balance. The good news is that most robo advisors will automatically rebalance your portfolio without you even having to lift a hand.

Can you raise your monthly contribution? This may seem obvious, but you’d be surprised how easy it is to set it and forget it. Set a calendar item every quarter or a couple of times a year to double check your monthly investment contribution. Can you raise it a percentage or two? Have you received a raise lately leaving you with more money each month to contribute? It’s smart to stay active with your monthly investment amount. If you need to, you can raise or lower that amount based on your current money situation.

Get our newsletter

There’s more great content where this came from.

Think buckets of wealth

It’s fun when you’re a kid to play with a bunch of different buckets at the beach to build the perfect sandcastle. Each bucket represents a different piece of your sandcastle masterpiece. The same concept can do your financial future wonders. Instead of playing with sandcastles, you’re filling buckets of wealth as you move through life and each one serves a purpose in your financial plan.

Your investment portfolio: This is a great bucket of wealth, but it doesn’t have to be your only one. You know the old adage, “don’t put all your eggs in one basket.” Apply it to your investments. Think beyond the investment dollars you have with the robo-advisor. Are you actively contributing to your 401(k), at least up to the company match? If you’re self-employed, are you contributing to a SEP IRA or Solo 401(k), or a Roth IRA if you qualify? Are you diversifying your investments, so you’re prepared for any market declines?

Other buckets of wealth that match your risk tolerance: There are many different ways to grow your wealth beyond the funds invested with your robo-advisor. Again, you should align your buckets of wealth with your financial goals and risk tolerance. Here is some food for thought to get you thinking about additional buckets:

  • Real estate – real estate can be an asset that earns income or can later be sold (keep in mind that we all need a place to live, so the primary residence might not be considered an asset in all situations).
  • Brokerage account – if you check your budget and find you have some additional funds, why not open a separate brokerage account and invest in stocks that you have your eye on?
  • Invest in a business – this may not be an option for everyone, but you might choose to become the owner of a percentage of a business that you believe in.
  • Health savings account – for eligible investors, a health savings account is a triple-win option for saving more money. If you have a qualifying high deductible health insurance plan, you can set up an HSA and contribute up to $3,450 for individuals and $6,850 for families in 2018 if you’re under 55. Your contributions lower your taxable income and grow tax-deferred, and withdrawals are tax-free for qualified medical expenses.
  • 529 college savings – although most states don’t offer a tax deduction for 529 savings, it’s still a great option to save money for college. Similar to a Roth IRA, you’ll contribute after-tax money, but earnings are tax-deferred and eligible withdrawals are tax-free.

Setting up a regular investment strategy is a colossal step toward crushing all those awesome goals you have for your financial future. Be proud of yourself. I’ve had a chance to work with some very wealthy people over the last decade as a CFP® professional, and I can tell you the one thing they all have in common is a focused eye on the future, always looking for new opportunities to continue to build their wealth. So don’t stop with your robo-advisor investment dollars – continue to search for new buckets of wealth to fill.

Life insurance that's actually simple.

Estimate your rate

Shannah is a CERTIFIED FINANCIAL PLANNER™ professional and is a millennial money financial strategist. She runs the blog Your Millennial Money, and is the host of the Millennial Money iTunes podcast. Her husband Jeff is a travel journalist, but when they aren’t traveling she loves to challenge herself in the kitchen by creating a culinary masterpiece worthy of Food Network fame (she can make a mean risotto).

Haven Term is a Term Life Insurance Policy (ICC15DTC) issued by Massachusetts Mutual Life Insurance Company (MassMutual), Springfield, MA 01111 and offered exclusively through Haven Life Insurance Agency, LLC. Not all riders are available in all states. Our Agency license number in California is 0K71922 and in Arkansas, 100139527.

Get the latest news

Apply now