Investment approaches of robo-advisors

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The various robo-advisors are based on two different approaches: The active or dynamic and the passive or static investment approaches.

Active investment approach

In the active investment approach, client portfolios are continuously rebalanced by the provider depending on market developments. This allows the robo-advisor to react flexibly to market developments and can even beat the market return.

Loss probabilities can also be kept at a level defined at the outset. The robo-advisor makes these adjustments automatically in mt5 download and can thus react faster to market movements than humans.

This principle is based on a complex financial mathematical model, which is based on calculations and simulations, and in some cases also on internal expert opinions. The aim is to constantly optimise the portfolio.

Due to this high additional effort and the frequent transactions, an actively managed portfolio is much more expensive than a passive one. Another problem is the possible lack of transparency in the individual decisions.

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Passive investment approach

In the passive investment approach, a weighting is initially assigned to the individual securities for each selected risk class.

Nothing is changed in this composition in the further course. Only rebalancing is carried out at intervals to restore the original distribution.

The original number of units of the individual financial products is adjusted in the rebalancing or through a shift in order to maintain the initial weighting in the portfolio. This is necessary because securities are subject to price fluctuations, which can change their weighting within the portfolio.

Which is the best robo-advisor?

This question can only be answered to a limited extent. In terms of costs, Quirion is by far the best robo-advisor. In the basic package, you only have to pay an annual fee of 0.48% in addition to ETF costs - and the first 10,000 EUR are completely free.

If you consider other aspects such as sustainability or a possible investment strategy, there is no simple decision to be made.

What Stiftung Warentest says

In 2018, the independent institute examined a total of 14 robo-advisors in its Finanztest format, including Cominvest, Ginmon, Scalable Capital, Warburg Navigator and Quirion.

The prerequisites were independent financial portfolio management, asset management on a fund basis and regulation by BaFin. Stiftung Warentest found some major differences in quality, costs and customer information.

With an overall score of 2.0, Quirion emerged as the test winner, followed by Whitebox with an overall score of 2.4 and Robin with 2.7. The decisive factor for the final result was above all the annual costs, but the information offered on the individual strategies and assets was also viewed critically.

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