BAJAJ BROKING

Notification
No new Notification messages
Inventurus Knowledge Solutions IPO is Open!
Apply for the Inventurus Knowledge Solutions IPO through UPI in just minutes.
Open a Free Demat Account
Pay ZERO maintenance charges for the first year, get free stock picks daily, and more.
Trade Now, Pay Later with up to 4x
Never miss a good trading opportunity due to low funds with our MTF feature.
Track Market Movers Instantly
Stay updated with real-time data. Get insights at your fingertips.

Robo Adviser in India- Meaning, Working & Key Benefits

Listen to our Podcast: Grow your wealth and keep it secure.

0:00 / 0:00

In today’s world, technology has revolutionised every aspect of our lives. The introduction of artificial intelligence in stock market trading is something remarkable. Gone are the days of squinting at stock charts and crossing fingers for luck! AI today has facilitated quick and informed orders to ensure that traders don’t miss out on any opportunity in the stock market. This amalgamation of artificial intelligence in stock market trading is known as Robo Advisory.

Let’s understand more about Robo Advisory in detail.

What is a Robo Advisor?

Robo advisors are online platforms provided by broking portals to help traders and investors make better decisions about their money. These platforms use algorithms to manage investment portfolios.

There are different types of robo advisors available and some even provide entirely automated decisions thus eliminating human intervention. Robo advisors have gained popularity amongst traders as they help in dealing with emotional trading and base all decisions solely on algorithms and market trends.

What is Robo-Advisory?

As the name suggests, robo advisory is an automated service used in the stock market to get advice on trading decisions and place orders on buying and selling securities, automatically.

The introduction of robo advisory has reduced human intervention in stock market trading which has helped in diversification, better decisions and overall expanded profit window for traders and investors.

What makes robo advisory a reliable service for traders is that the advice provided is based on fundamental and technical analysis conducted through advanced machine learning and artificial intelligence. It’s like having a turbocharged brain that makes lightning-fast, super-smart decisions so you never miss a market move.

How Robo-Advisors Work?

Now that you have a fundamental understanding of robo advisors, let’s understand how they work.

Robo advisors are designed to offer automated services in stock market trading. As soon as a trader signs up on a robo advisor platform, automation of their trading decisions begins.

Robo advisors work to facilitate smart decisions based on the information provided by the trader. Additionally, every decision is based on the trader’s financial goals and risk appetite. Here’s how

robo advisors work for every trader:

  • Choose an investment pool.

  • Implements modern portfolio management theories.

  • Mitigate through losses and shift investment to expand profit margin.

Let’s take an example to simplify the working of robo-advisors: For investment portfolios featuring ETFs (Exchange Traded Funds) balanced long-term growth, robo-advisors would suggest investment in an IRA rather than a taxable account and for ETFS balanced for short-term growth it would advise a taxable account.

Evolution and Growth of Robo-Advisory in India

Although popular, robo-advisory is a rather new service for traders and investors in India. To mark the evolution and growth of robo advisory in India, let’s take a look at the major milestones:

  • Rise of the tech-savvy and young population interested in stock trading who preferred automated and digitalised trading experience.

  • The penetration of online trading and growing dependency on technology opened doors for robo-advisory in India.

  • The reliability of offline advice was reduced given the lack of accessibility for all kinds of traders. Additionally, the cost of investment advisory was touching the sky which became unaffordable for many.

  • Robo-advisory came in at the right time with its affordable and reliable features.

  • As the market grew volatile, human errors and lagging market analysis paved the way for robo-advisory in India.

Characteristics of Robo Advisors

Robo advisors have become an integral part of stock market trading in India and one of the biggest reasons for this is their unique and reliable characteristics:

  • 24/7 Accessibility: A key feature of robo advisors is that they are available for you 24*7, unlike traditional investment advisors.

  • Transparency: Robo advisors have a transparent working system when it comes to costs and methods of managing investment portfolios.

  • Efficiency: Based on advanced machine learning and artificial intelligence, robo advisors are efficient in facilitating profitable decision-making.

  • Low Costs: Another key characteristic of robo advisors is their low costs especially compared to traditional investment advisors.

Pros & Cons of Using a Robo-Advisor

Just like every automated service in stock trading, it is crucial to evaluate the pros and cons of robo advisors before choosing to trade with them.

Pros of Robo Advisors

  • Cost Effectiveness

    Before the introduction of robo advisors, traders and investors had to either rely on their research or spend chunks of money on investment advice. Robo advisors offer affordable yet reliable and efficient decision-making for all levels of traders and investors.

  • Regular Customisation Allowed

    Stock market investing or trading requires periodic alterations in the investment portfolio. Robo advisors allow traders to customise their preferences at any time they want to.

  • Helps Optimise Tax Benefits

    Investing in the stock market comes with certain tax implications, especially on short-term and long-term capital gains. Robo advisors are designed to help optimise tax benefits and minimise tax implications on the investment portfolio.

Cons of Robo Advisors

  • Limited Flexibility

    Certain market sentiments go beyond algorithms and trends. Relying on robo-advisors eliminates these market sentiments. For instance: In many cases, robo-advisors don’t allow the selling of call options on existing portfolios which otherwise is a sound strategy for investors.

  • Lack of Human Intervention

    Investors looking for personal contact with the financial advisor might not find robo-advisors comfortable. Additionally, their advice is strictly limited to trading and investment decisions and not any other financial planning.

  • Limited Personalisation

    While robo advisors allow customisation they offer limited personalisation to help you deal with trader’s financial crunches better.

Comparison: Robo-Advisors vs Financial Advisors

Robo advisors are often confused with financial advisors. While they both help traders and investors to make informed decisions about their money, there are differences in their nature and scope. Take a look at this comparison table:

Nature of Difference

Robo-Advisors

Financial Advisor

Minimum Deposit

The minimum investment requirement is lower than financial advisors

The minimum investment requirement is usually high and unaffordable for small investors.

Management Style

Robo Advisors manages investment portfolios passively. The investment is done in ETFs or index funds to mimic the market for profit.

Active management through direct investment in different types of securities.

Financial Planning

Provides detailed information on market trends but can not take into consideration a larger financial picture.

Provides comprehensive financial advice but can be prone to common human errors.

Additional Read: How to become a registered financial advisor?

Top 5 Robo Advisors in India

Let’s take a look at the top 5 Robo Advisors in India:

  • BigDecisions

    BigDecisions is a popular platform for investors and traders to find reliable financial advice not only on online trading questions but also on investment, retirement, loan etc plans.

  • FundsIndia

    One of the oldest and biggest robo advisors is FundsIndia. They have multiple features to guide investors of all levels.

  • Scripbox

    Traders and investors looking for a user-friendly interface can explore Scripbox. They have made trading for beginners simple but are limited to regular fund investment only.

  • Arthayantra

    Known for automated financial planning, Arthayantra is one of India’s oldest robo-advisors.

  • MyUniverse ZIPSIP

    A rather recent addition to the list, MyUniverse ZIPSIP is known for hands-on advice on mutual funds through SIPs and a lot more.

Gaps in Existing Robo Advisor Platforms

Since India’s robo advisory platforms are in their evolution space, certain gaps need to be dealt with:

  • Lack of Automation

    The concept of robo-advisory is based primarily on automation that does not require human intervention. However, the existing robo-advisor platforms in India are yet to become fully automated. Currently, they require some level of human intervention to start a transaction.

  • Varying Pay Structure

    The fee structure of robo-platforms in India is not guided by any cohesive authority which makes it vary extremely.

How to Choose the Right Robo Advisor?

Robo advisors are reliable and efficient in many ways. However, you must choose a robo advisor platform smartly. Here’s how:

  • Requirement of Minimum Investment

    Remember that initiating investment through robo-advisor platforms requires you to maintain a minimum investment balance. Make sure to check this requirement.

  • Costs and Other Charges

    Every transaction automated by robo-advisors and management of the investment portfolio requires you to pay certain fees. Checking these feeds and costs can save you from any confusion in future.

  • Automation Feature

    Robo advisor platforms in India offer different levels of automated services that must be evaluated carefully before choosing a platform.

  • Investment Options

    Make sure to check the investment options of the robo-advisor platforms as many platforms have limited options available that can restrict your growth and profit margins.

Is Robo Advisory Right for You?

Understanding whether relying on robo-advisory is right or not is a subjective matter. If you consider yourself a tech-savvy person who wants to experience automated trading, then robo-advisory is the right choice.

However, if you are dabbling with the idea of automated trading with robo advisory, then considering these aspects will make the decision easier:

  • Do you consider yourself tech-savvy?

  • Are you willing to trust robo-advisory for trading decisions?

  • Is your robo-advisory platform built on credible data?

How does Robo Advisory differ from India to the US?

Robo Advisory in India has come a long way to offer unique features and assistance but it still lags in key areas. Let’s compare robo advisory in India to that of the US for a better understanding:

  • Automation

    Robo advisors are fully automated when it comes to picking investments and making transactions. This is one aspect where India lacks as robo advisory platforms require the user to initiate the transaction at some level manually.

  • Costs

    The fee structure in India is not regulated and are either a free or flat fee that is charged annually. While in the US, the costs of robo advisory platorms are based on AUM (Assets under management).

  • Investment Options

    Robo advisors in India are equipped to perform only passive investments to mimic the market trends that often limits the scope for users. Whereas robo advisors in the US manage funds actively.

Takeaways

  • Robo advisory is an automated service platform that helps traders and investors make automatic trading transactions, manage investment portfolios, and expand profit margins based on customised data fed by the trader/investor.

  • Robo advisors in India grew in the wake of digitalisation and increased number of tech/savvy traders.

  • Names like Arthayantra, MyUniverse ZIPSIP, Scripbox, FundsIndia, BigDecisions etc are performing well as a robo advisory platform.

  • Robo advisors in India differ from those of the US as the former is limited in its scope and automation features.

Additional Read: The Power of Financial Research & Advisory Services in India

Disclaimer: Investments in the securities market are subject to market risk, read all related documents carefully before investing.

This content is for educational purposes only. Securities quoted are exemplary and not recommendatory.

For All Disclaimers Click Here: https://bit.ly/3Tcsfuc

Share this article: 

Frequently Asked Questions

What is a robo advisor?

Answer Field

A robo advisor is an automated service platform that helps traders and investors make automated trading decisions based on the information and customisation provided.

How does robo-advisory work in India?

Answer Field

Robo advisors in India are based on advanced machine learning and artificial intelligence. Traders can sign up, fill in information for customisation and start automated trading.

What are the benefits of using a robo-advisor?

Answer Field

Robo advisors are beneficial for offering quick transactions based on trends and algorithms. Using automated trading eliminates the chances of delayed orders and human errors.

Are robo-advisors safe for investments?

Answer Field

Yes, robo advisors are safe for investors. Although criticism like lack of information and lag in market research methods surround robo advisors that must be taken into consideration.

How much does a robo-advisor cost?

Answer Field

The cost of robo advisors in India varies across different platforms that can be checked from their official websites.

Do I need a robo-advisor or a financial advisor?

Answer Field

The need for a robo advisor or financial advisor depends on your requirements. For instance, for trading and investment purposes choosing a robo advisor makes for the right choice. On the other hand, if you are looking for comprehensive financial advice and personal contact with an advisor, a financial advisor is what you need.

What are the common robo-advisor features?

Answer Field

Some common features of robo-advisors include low costs, efficiency in trading orders, transparency and 24*7 availability.

No Result Found

Read More Blogs

Our Secure Trading Platforms

Level up your stock market experience: Download the Bajaj Broking App for effortless investing and trading

Bajaj Broking App Download

8 Lacs+ Users

icon-with-text

4.4+ App Rating

icon-with-text

4 Languages

icon-with-text

₹4700+ Cr MTF Book

icon-with-text