Investing is a tricky art that requires a lot of finesse and research. But what if we told you it can be done all with math and science? These days, people can find love through matchmaking algorithms, so why not put that math to use for our money? Robo-investing is an up-and-coming domain that uses proven algorithms to change the way we see the market. Here's why sometimes, robots can be better than people.
1. Robots don't need a high paycheck.
Wealth managers and financial advisors come with a hefty price tag, so that's why we suggest going digital. With less people to pay, robo-advising firms can transfer those savings to you.
2. Get out of exorbitant starting requirements.
Hiring a financial investment advisor could mean that you have to have minimum assets of $500,000.00. This makes investment feel like an elite club. Robo-investing opens the playing field to all levels of investors.
3. Still maintain the human touch.
Robo-investing doesn't completely kick humans out of the equation. Check out the variety of firms available where you can talk to a real-live human if need be.
4. Trust math.
Algorithms. You might not know (or care to know) how they work, but they do. Robo-investors use the same resources as human financial planners in terms of portfolio management.
5. It's simple to use online.
Ah, the Internet. If you're young and savvy, a robo-investor can make everything easier to automate your investments online so you can make money from your couch.
6. There's an app for that.
Check out these handy apps to help you manage your own investments on the go.
7. There are a ton of choices out there.
Everyone is unique, and therefore, we all feel comfortable with different investing strategies. For a full list of top rated robo-investors with a variety of cool features, check this out.
While some of us fear the robot apocalypse, investors should embrace this digital enterprise. Technology is stronger than ever, and now it can make us money.
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- Should You Let a Robot Pick Your Investments? - Forbes ›
- Bank of America Robot Will Give Investment Advice - Fortune ›
When you take out a loan for a car, charge something to your credit card, or get a personal line of credit, there is going to be an interest rate that applies to your loan.
A lot of different factors go into what you will be charged, including your own personal credit score. But even those with flawless credit still see a minimum charge that they can't get around. That all goes back to the Federal Funds Rate.
One thing consumers rarely realize is that all of our banks are lending money to each other every night. Banks are legally required to maintain a certain percentage of their deposits in non-interest-bearing accounts at the Federal Reserve to ensure they have enough money to cover any withdrawals that may unexpectedly come up. However, deposits can fluctuate and it's very common for some banks to exceed the requirement on certain days while some fall short. In cases like this, banks actually lend each other money to ensure they meet the minimum balance. It's a bit hard to imagine these multibillion-dollar financial institutions needing to borrow money to tide them over for a bit, but it happens every single night at the Federal Reserve. It's also a nice deal for those with balances above the reserve balance requirement to earn a bit of money with cash that would normally just be sitting there.
The Federal Reserve
The exact interest rate the banks will charge each other is a matter of negotiation between them, but the Federal Open Market Committee (FOMC) (the arm of the Federal Reserve that sets monetary policy) meets eight times a year to set a target rate. They evaluate a multitude of economic indicators including unemployment, inflation, and consumer confidence to decide the best rate to keep the country in business. The weighted average of all interest rates across these interbank loans is the effective federal funds rate.
This rate has a huge impact on the economy overall as well as your personal finances. The federal funds rate is essentially the cheapest money available to a bank and that feeds into all of the other loans they make. Banks will add a slight upcharge to the rate set by the Fed to determine what is the lowest interest that they will announce for their most creditworthy customers, also known as the prime rate. If you have a variable interest rate loan (very common with credit cards and some student loans), it's likely that the interest rate you pay is a set percentage on top of that prime rate that your lender is paying. That's why in times of low interest rates (it was set at 0% during the Great Recession), a lot of borrowers should go for fixed interest rate loans that won't increase. However, if the federal funds rate was relatively high (it went up to 20% in the early 1980's), a variable interest rate loan may be a better decision as you would be charged less interest should the rate drop without the need to refinance.
The federal funds rate also has a major impact on your investment portfolio. The stock market reacts very strongly to any changes in interest rates from the Federal Reserve, as a lower rate makes it cheaper for companies to borrow and reinvest while a higher rate may restrict capital and slow short-term growth. If you have a significant portion of your investments in equities, a small change in the federal funds rate can have a large impact on your net worth.
Whether you're leaving a job involuntarily, departing for something new, or just want to prepare for the unknown, it is smart to understand all your options regarding your 401k.
Frugal gifting often gets a bad reputation. However, this shopping method does not make you cheap — it makes you practical. Frugal gifts often avoid waste and overspending and can be just as meaningful (if not more so) as any other present.
With the National Retail Federation predicting each consumer this holiday season to spend upwards of $1,000 on holiday gifts amidst an economic recession —this year might be the perfect time to reconsider your spending budget. We've formulated the ultimate list of frugal gift-giving ideas to get you started.