Definition
Robo-Advisory
Robo-advisory is automated, algorithm-driven investment advice and portfolio management delivered online, typically recommending and managing low-cost diversified portfolios based on your profile.
A robo-advisor uses algorithms to assess your goals, risk appetite and horizon, then suggests and often automatically manages a diversified portfolio, frequently using mutual funds or ETFs. It lowers the cost and minimums of getting investment guidance.
In India, entities giving investment advice generally need to be SEBI-registered Investment Advisers (RIAs), and robo-platforms operate within that regulatory framework. Automation handles rebalancing and goal tracking with minimal human intervention.
Robo-advisory offers low-cost, disciplined investing, but the advice is only as good as the algorithm and the inputs you provide; it may not handle complex or unusual financial situations well. Markets risk still applies.
Related terms
- Portfolio Management Service (PMS)A Portfolio Management Service is a SEBI-regulated, personalised investment service where a professional manages a wealthy client's portfolio, subject to a high minimum investment.
- SmallcaseA smallcase is a ready-made basket of stocks or ETFs built around a theme or strategy that investors can buy in one click through their broker, holding the securities directly.
- Direct IndexingDirect indexing means owning the individual stocks that make up an index in your own account, rather than buying an index fund or ETF, allowing customisation and tax management.
Plain-English explainer from The Dispatch Investors Encyclopedia. General information, not financial advice.