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What Are Robo-advisors And Can You Trust Them? Team Team

Last updated 10 November, 2021

Investing is important. 

And you’ll probably lose it if you see another article talking about it. 

But the thought of it scares you. After all, nothing is guaranteed when you invest except that you’ll be taking some losses. And you don’t even have an inkling of where to start learning about the flashing green and red lights on the screen. 

Everything just feels so overwhelming. 

If this sounds familiar, a Robo-advisor might just be the missing piece in your puzzle. 

How do Robo-advisors work? 

Thanks to the brilliant minds who constantly push boundaries, we now have a digital platform that uses algorithms to automate investment portfolios. In simple terms, it’s a computerized portfolio manager

Once you’ve given this robot a set of instructions based on your investing goals and risk tolerance, the robot will do the rest. 

Benefits of using a robo-advisor

  • Passive investing - For first-time investors, robo-advisors are especially useful because you can have your money invested already while learning more about the financial world. Or, if you’re someone who is tremendously busy with your day job and have little to no time for research, monitoring, or rebalancing, robo-advisors are a great idea too.
  • Diversification - Being diversified helps you spread your risk. Utilize robo-advisors to help you invest in a certain market while you dip into other types of assets.
  • Reducing emotions - One of the worst mistakes a long-term investor can make is to panic sell during a market correction or a bear market. But having said that, many investors still do because it always seems like it’s going lower. With a robo-advisor, however, it’s going to help you dollar cost average into your preferred asset. Robots don’t have emotions, hence reducing the downside of emotion-driven decisions to buy or sell on market sentiment.
  • Low fees - Gone are the days where we have to pay upwards of 5% to portfolio managers just to help us buy stocks. Robo-advisors generally have less than 1% of management fees per year. It makes it much easier to turn a profit even when the market is not doing well.


Cons of using a Robo-advisor

  • Rigidity - Robo-advisors do not have the ability to completely personalize your preferences. They run on specific codes, which means when you input your budget, risk tolerance, etc., the most it can do is to place you in a classification.Secondly, because market crashes are so rare, robo-advisors can often leave you vulnerable to some other risks if you’re not careful. These robots do not have the ability to adapt to black swans and first-time events. Juxtaposed to that, you’ll also lose out on exponential gains during a market rally.

    Your financial advisor, on the other hand, is human. That means they can give you guidance, opinions, ease your fear during market turbulence, give you confidence, and tweak their strategy according to market conditions. 

  • Transparency - If you’re a technical and savvy investor who wants to know the strategies and criteria behind the curtains, you might not get that. Generally, the most you can get is the reports and the expectancy of a certain strategy.


How do you choose the perfect robo-advisor? 

There are quite a number of robo-advisors available in Malaysia now such as StashAway, MyTHEO, BEST, Wahed Invest, and Raiz. Each of them caters to distinct investors using their proprietary technology. With that, here are a few considerations among them: 

  • StashAway and MyTHEO: Both of these robo-advisors focus on ETFs, which gives you exposure to global markets and further diversifies your portfolio.
  • BEST: Caters to investors who specifically look to invest in Shariah-compliant unit trust funds.
  • Wahed Invest: Caters to investors who specifically look to invest in Shariah-compliant securities in the global market.
  • Raiz: Invests in local ASN funds. Caters to investors who do not have huge amounts of money.

Robo-advisors are meant to bring the convenience factor into your investing routine. It works best if you want easy, simple, automated, and low-cost help. However, when compared with professional advisors who have spent years studying the markets, the advantages might fall short. 

Financial matters are extremely personal, and we all want different things. If the robo-advisor can give you what you’re looking for, by all means, go for it; but if not, you can still find a certified financial advisor for just a small bump in the fees. 

Disclaimer: Neither nor the content on it is intended as securities brokerage, investment, tax, accounting or legal advice, as an offer or solicitation of an offer to sell or buy, or as an endorsement, recommendation or sponsorship of any company, security or fund. The content on is for general information purposes only and is not intended to be personalised investment advice or a solicitation for the purchase or sale of securities.

Compargo Malaysia Sdn. Bhd. and/or its affiliates cannot and do not assess, verify or guarantee the adequacy, accuracy or completeness of any information, the suitability or profitability of any particular investment, or the potential value of any investment or informational source. may receive compensation from the brands or services mentioned on this website.

If you’re new to investing but you’d like to know more, you can check out all our articles on investment that cover the basics to the more advanced stuff:

Find Out More On How To Invest

The team is comprised of many talented individuals, sharing their knowledge, experiences and research to help others make better financial decisions.


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