How Robo-Advisor Makes Investing Easy

How a Robo-Advisor Makes Investing Easy: A Practical Guide for Beginners in Saudi Arabia

Investing can be complicated, especially for beginners, when we hear terms like “stock market”, “mutual funds”, or “bonds”. We may feel nervous as if we are entering a strange world. I remember when I first started thinking about investing, I was excited but at the same time I was hesitant because I didn’t know where to start. Should I invest in stocks or bonds? Do I have enough money to start? Is it a risky venture that I could lose?

If you have the same questions, you are not alone. The good news is that investing is no longer as difficult or worrying as before. Technology today has made the subject much easier, and there are now solutions that suit everyone, even those who have no experience in investing. One of the best of these solutions is the Robo-Advisor platform, which is a digital financial assistant that manages your investments automatically and professionally, without any effort from you. Let’s learn more about the Robo-Advisor and how it can help you build your financial future with confidence and comfort.

What is a Robo-Advisor?

A robo-advisor is an online platform that uses advanced technologies to automatically manage your investments. It’s as if you’re dealing with a personal financial advisor, but instead of meetings and high costs, you use an app or website that manages your investments. You don’t need to be an investment expert because the robo-advisor does all the complicated work for you.

As soon as you register, the robo-advisor asks you to answer simple questions such as: “What is your goal when saving?”, “How willing are you to take risks?”, and “Do you know what has higher risks: stocks or Bitcoin?” For example. Based on your answers, it will start designing a customized investment plan that suits your financial ambitions, and suggest an investment portfolio consisting of stocks, bonds, real estate, and some commodities, such as gold, for example. That is, when you invest a small amount through the platform, the platform distributes the amount you invest across all these different assets. That is, the matter is simple and smooth, as if you were using a banking application or even ordering a meal through delivery applications.

Why is the robo-advisor an ideal choice for beginners?

When I started investing, I was trying to learn everything by myself, and I was reading articles and watching videos to learn how to trade in the stock market, and know when to buy so as not to lose. But honestly, the subject was a bit confusing and complicated; however, I tried to learn as much as possible about trading, I find it difficult to choose a stock to buy, and I think at the time "This stock will definitely rise with time!", but the shock surprises me when the stock's value drops, and I get scared at that time and sell! Over time, and after many failed attempts, and losing large amounts for me, I decided that I would never trade. But then I heard about the robo-advisor platform, and I decided to try it, and this was the best decision for me. I felt a big difference in the new way of dealing with my investments. These are some of the reasons that make the robo-advisor platform an excellent choice, especially if you are at the beginning of your investment career:

1. Ease of Use

The goal of a robo-advisor is to make investing easy for anyone, even if they don’t have financial experience. Most platforms start with clear and simple questions about your financial goals. For example, are you saving for a home? Planning for retirement? Or even saving for travel? The robo-advisor uses this information to build an investment plan that suits your financial goals and your ability to tolerate investment risks, because no investment is without risk, and the more you want higher investment returns, the more you should invest in assets with somewhat higher risks.

The process of registering on the platform and setting it up took me about 5 minutes, and honestly, it was a comfortable feeling. I didn’t need to worry about choosing stocks and funds or timing the market; the robo-advisor took care of everything and suggested the right portfolio for me.

2. Low and convenient cost

Some people avoid financial advisors because of the high cost. The robo-advisor provides the same services at a lower cost. Typically, financial advisor fees range from 1% to 2% per year, but with robo-advisor platforms, fees range from 0.25% to 1% per year - maximum - of the portfolio value. This means that if you are just starting out and investing a small amount, the robo-advisor provides you with a reasonable option that guarantees you entry into the world of investment without significant costs.

3. Automatically manage your portfolio

One of the great features of the robo-advisor is that it manages your portfolio automatically. This means that you do not need to monitor the market or make decisions on a daily basis. Once you register and answer the questions, the robo-advisor takes care of the rest. All you have to do is deposit in the portfolio and the platform takes care of the process after that. It even rebalances your investment portfolio, what does that mean? This means that when the market conditions change, the robo-advisor makes adjustments to the portfolio to maintain its balance and ensure that you achieve your financial goals throughout your investment period on the platform.

For example, if the value of stocks increases significantly and occupies a large part of your portfolio, the robo-advisor can transfer some of the money in your portfolio from one asset to another to distribute your investments in the basic and balanced form at the beginning of your investment journey to reduce your risks. All this happens without you lifting a finger. "Set it and forget it" means that I don't need to constantly check my investments or worry every time there is a change in the market. It's as if you have a financial assistant working 24/7 and taking care of everything.

4. Automatically reinvest profits

One of the best features of the robo-advisor platform is that it automatically reinvests dividends, so you can easily benefit from the compound return feature. Your investment portfolio consists of funds that invest in various assets and companies, and over time, these funds distribute profits to investors. It is true that these distributions are a small part of the annual return on your investments, but the biggest profit comes from the growth in the value of the stocks in your portfolio, and reinvesting profits maximizes the return on your investment. Once a fund in your portfolio distributes dividends, the platform automatically reinvests them, without you having to do anything yourself.

A question may come to your mind: "Why don't I withdraw the dividends and benefit from them? Isn't that the purpose of investing?" Here we usually advise you to let the dividends be invested automatically so that you can benefit from the profits on a larger amount next time. That is, if you initially invested 10,000 riyals and received dividends of 100 riyals (for example, at a rate of 1% every quarter), next time the fund will give you 101 riyals instead of 100, because you added the dividends to the capital, and you now have 10,100 riyals. The difference is simple, right? But imagine repeating this process over many years! You will notice how the profits multiply thanks to the compound return and contribute to maximizing your investment continuously.

5. Automatically diversify the portfolio

The principle of diversification in investment is important because it helps you reduce risks. The idea is simple: don't put all your investments in one place. The robo-advisor automatically diversifies for you, building a portfolio distributed across stocks, bonds, real estate, and even commodities — like gold — based on your goals and risk tolerance. When I started using the robo-advisor, the portfolio was distributed across local and international stocks, bonds, real estate, and even gold. I didn’t need to research and think about all the details, and the result? A diversified and balanced portfolio distributed in a way that guarantees me high returns and greater stability.

6. Robo Advisor FAQ

It is natural that you are wondering or have concerns about dealing with a digital platform to manage your money. These are some of the questions that many people ask.

A. "If I want to talk to a real person."

Although the robo advisor relies on automation, it provides the option to talk to real financial advisors if you need any additional assistance.

B. "Is my money safe?"

Security is of utmost importance when dealing with money online. The robo advisor uses advanced security technologies to ensure that your financial information is protected. In addition, most robo advisors in Saudi Arabia are licensed and regulated by the Capital Market Authority with an official license or a permit to experiment under the FinTech lab, which ensures that your investments are safe and in line with international laws.

C. "What happens if the market goes down?"

Fluctuations in the market are natural and can happen at any time. The robo advisor deals with these fluctuations through smart strategies such as diversification and rebalancing. This way, even if the market goes down, your portfolio remains balanced and returns are stable, and you are not supposed to be afraid of market fluctuations in the short term, and you are focused on investing for years, because the impact of the decline in short periods does not make a difference to you in the long term, because the market is always growing and stocks are rising.

Conclusion

Investing does not have to be complicated or difficult. The robo-advisor makes the journey easier for you and provides you with a suitable investment plan at reasonable prices, without the need for continuous intervention. Whether you are at the beginning of your journey or have previous experience, the robo-advisor helps you grow your money in an effective and comfortable way.

My personal advice, if you are thinking of investing, the robo-advisor is the ideal choice for you and others. Because it suits all levels and their financial goals, especially in Saudi Arabia, with applications such as Tamra Financial that provide the robo-advisor service at competitive prices and high returns and at the peak of ease