In the third installment of our “Start Investing with Your Solo 401k” series, we’ll cover Robo Advisors.
Click here to read the first installment about using your Solo 401k to invest in Gold & Silver.
Click here to read the second installment about using your Solo 401k to invest in Private Lending.
You have several responsibilities in your Solo 401k. Funding the plan, investing with the 401k trust funds, and staying on top of reporting, to name a few. Sometimes it seems like a daunting task. If the Solo 401k is new to you, your only investment experience might be the stock market. Therefore, alternative investing can be a bit of a culture shock.
Access to Traditional Assets
Some clients prefer to ease their way into alternative investing. Signing up with a Robo Advisor is a good path to transition having an advisor manage all of your stock market investments to you taking control. Instead of guessing at what investments will perform well, you can utilize this service for very good portfolio management.
What is a Robo Advisor?
A Robo Advisor is an online model that provides investment recommendations. These recommendations are based on a series of algorithms and computations with very little human interaction. A Robo Advisor is not a substitute for a financial planner, but can instead help you decide what types of investments you want to make with your Solo 401k within the stock market. The Robo Advisor can also tell you when to buy/sell your assets.
How Does it Work?
Once you find a Robo Advisor site that you like, open an account with them in the name of your Solo 401k trust. You’ll enter basic information about yourself and your goals. This information usually includes the amount you want to invest, your risk tolerance, and when you want to retire. The Robo Advisor will take this information to create a recommended profile for you. Some Robo Advisors will also auto-invest for you, based on your preferences.
Why Does This Matter?
Most Solo 401k entrepreneurs are not full time stock traders. Normal investors lack the training, expertise and time to become a professional trader. This is where the Robo Advisor can step in. A Robo Advisor is programmed to use algorithms and probability patterns to recommend when and what to invest in within the stock market.
For a small fee, you can take the information and start investing in the stock market on your own.
In order to create your recommended portfolio, a Robo Advisor will ask you about some or all of your following preferences:
- High, medium or low risk investments
- Short or long term investments
- How long you’re required to hold the investment before selling
- When you want to retire
- How much you have to invest
Robo Advisors in Your Solo 401k
There are a number of Robo advisor services on the market. However, not all Robo Advisors are created equal. Though many Robo Advisors are compatible with IRAs, most don’t work with a Solo 401k trust.
As of the date of this article, we’ve identified one site that will allow Solo 401k Trust investment accounts: Wealthsimple
Wealthsimple allows for many different accounts, both retirement and personal. To open an account on this platform for your Solo 401k, open a trust account using your Solo 401k trust name and EIN. Wealthsimple has a $0 initial deposit and they collect a .5% annual fee.
Wealthsimple will personalize your portfolio based on the answers you give about what type of investing you’d like to do. In addition, they can auto-rebalance your account (if you’ve selected this option). Further, you can set up auto-deposits from your Solo 401k trust bank account, and auto-reinvest money from investment dividends.
If you’re looking for a simple automated investing platform, Wealthsimple might be a route to consider. Their client website is very straightforward and easy to navigate, both via computer or smartphone. They are available for tech support via email or phone. Note that their portfolio advisement is only available via the client platform, not by phone or email.
Looking for more help? We’ve created a step-by-step guide on how to open Wealthsimple account for your Solo 401k trust. Have questions after reviewing the guide? Reach out to us and we’ll be happy to see how we can help.