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Columns | Go Far With Kovar

Robo Advisors vs.
Human Advisors

by Taylor Kovar
Hey Taylor - The stock market has been a rollercoaster lately, and I'm wondering if I'm better served by a robo advisor during these wild times, or a real live broker. Do people tend to help or hurt more than automated systems during these times? - Chandler in Corrigan

Hey Chandler - That's a great question. When the market is constantly rising and falling, you'll hear all sorts of ideas about how you should weather the storm and make the most money, and a lot of that advice will be bad. So, when the market is crazy, are you better served by humans or robots?

Before you can decide who's better equipped to navigate a volatile market, you have to look at where your money is. If you have a billion different positions stacked in a mutual fund, no one can save you. Your money can't work properly when the market is bouncing all over the place and you have hundreds and hundreds of companies in your portfolio. Meanwhile, moving your money around to correct these losses will probably just land you with a bunch of service fees and continued sub-par returns.

Generally, when the market makes large moves in either direction, the wrong choice is to be too reactionary (unless you're lying in wait for a good value purchase). People are more prone to poor reactions than neutral programs, and that can work to your benefit. Of course, having a level-headed financial advisor who doesn't panic at the natural ebbs and flows of the market is just as good, if not better, than an automated system.

Keep in mind, the stock market loves reacting to things people say and do. Take the recent tariff talk for example, and the immediate drop in stock prices. No tariffs had been levied, no new laws had been signed, but investors reacted to the idea and the market turned. Robo advisors can immediately analyze and utilize relevant data, and that can give investors an advantage in some cases. At the same time, no form of predictive analytics can determine what people are going to say and how other market investors will react to those words. If a program could do that, the Dow would be around 1,000,000 and Wall Street would implode.

I don't believe that one type of advisor, live or automated, is better during bullish or bearish cycles. I do believe, however, that certain people benefit more out of human advisors and others benefit more from an automated service. If you can figure out which you prefer, you should stick with that option during the good times and the bad, and I expect your money will grow in the long run. Good luck, Chandler!


Taylor Kovar March 30, 2018 column
More "Go Far With Kovar"


Disclosure: Information presented is for educational purposes only and is not an offer or solicitation for the sale or purchase of any specific securities, investments, or investment strategies. Investments involve risk and, unless otherwise stated, are not guaranteed. Be sure to first consult with a qualified financial adviser and/or tax professional before implementing any strategy discussed herein. Past performance is not indicative of future performance. To submit a question to be answered in this column, please send it via email to Question@TaylorKovar.com, or via regular mail to Lessons on Wealth, 106 E Lufkin Ave., Lufkin, TX 75901.

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