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Looking for a real estate side hustle? Whether you are looking for passive income ideas or if you are looking for a part-time job (or more!), there are many different real estate side hustles. I have done a few different real estate side gigs, and I know many people who have side hustles in this…

Looking for a real estate side hustle?

Whether you are looking for passive income ideas or if you are looking for a part-time job (or more!), there are many different real estate side hustles.

I have done a few different real estate side gigs, and I know many people who have side hustles in this area as well. To get started in real estate, you don’t have to spend a lot of money – there are several real estate side gigs that can be started even if you are brand new or are on a budget.

Key Takeaways

  • Real estate side hustles have a range of options from income generating assets to freelance opportunities to office jobs.
  • You can supplement your income with both short-term and long-term real estate strategies.
  • Finding the right fit depends on your availability, investment capacity, and financial goals.

Best Real Estate Side Hustles

Here’s a quick summary of some of the different best real estate side hustles:

  • House hacking: Buy a property, live in one unit, and rent out the rest.
  • REIT investing: An easy way to start investing in real estate with less capital.
  • Airbnb rentals: Rent out a spare room or an entire property on a short-term basis.
  • Property management: If you’re organized and good with people, managing properties for others could be a perfect fit.
  • Long-term rentals: Becoming a landlord can generate steady cash flow.
  • Fix and flip: Buy properties that need work, renovate them, and sell them for a profit.

Below, you will read the full list and learn more about each one.

1. House flipping

Flipping houses can be a good real estate side hustle if you like real estate and enjoy fixing things up.

When you flip houses, you’re basically buying homes, making them better with repairs and upgrades, and then selling them to make more money.

The first thing to do for a successful house flip is to find a property that can be made better, such as by looking for homes in neighborhoods that are getting better or have room to grow. Think about things like where it is, what the market is like, and the condition of the property.

Before putting money into anything, it’s important to carefully look at the finances. You’ll want to figure out how much it will cost to buy, fix, and keep the property, and think about things like the cost of materials, paying workers, getting a loan, and the costs while you’re fixing things.

To flip a house well, you need to make smart changes that make the property better, without spending too much, by concentrating on important areas like the kitchen and bathrooms, and fixing any big problems with the structure or safety.

Recommended reading: 10 Best Books on Flipping Houses To Make Money

2. Investing in REITs

Real Estate Investment Trusts (REITs) are companies that own, operate, or finance income-generating real estate. They are a way for you to invest in real estate without directly managing or owning properties.

An REIT is like a company that owns and takes care of real estate that makes money. They sell shares of this company to people, kind of like how stocks work.

When you invest in REITs, you can earn money from the real estate world without actually owning any property. So, if you don’t want to deal with being a landlord, this could be a good option. It’s way less work than owning property and handling it yourself.

You can even spread out your money and invest in different kinds of properties with REITs, like houses, offices, factories, and stores.

3. Getting a roommate

Getting a roommate in your home, whether that be a full-time roommate or renting out an extra room in your home short-term on Airbnb, can be a great real estate side hustle that doesn’t require very much work from you.

The earnings you can make from having a roommate depend on things like:

  • Where your home is (an expensive area? rural?)
  • The space you are renting to a roommate (for example, do they get their own bathroom? private entrance available?)

To find a roommate, you can share about it on your own Facebook page, put up an ad on sites like Craigslist, or make a rental listing on Airbnb. There are lots of places where you can let people know you’re looking for a roommate.

I have had many roommates in the past when I was younger and had a home with spare bedrooms. I would rent them out to long-term renters and people that we personally knew (such as friends and my sister).

Recommended reading: Tips For Renting A Room In Your House.

4. Airbnbs and vacation rentals

Turning your property into an Airbnb or other short-term rental can be a way to generate extra income. This is when you rent out your space, whether a full house, an apartment, or just a room, to travelers for short stays.

Before starting your Airbnb side hustle, be sure to:

  • Check local laws: Make sure short-term rentals are permitted in your area. There are many areas nowadays that are more strict when it comes to short-term rentals.
  • Understand the financials: Calculate potential earnings against expenses like mortgage, utilities, and maintenance.
  • Set up your space: Furnish and decorate to create a welcoming environment.
  • Market your rental: Use high-quality photos and create listings on rental platforms like Airbnb and Vrbo.

The amount you can earn can vary, with some hosts making around $5,000 to $10,000 a month or more, but this depends on factors such as location, rental type, and occupancy rates. Always plan for occupancy ebbs and flows – it’s part of the short-term rental business.

5. Real estate photography

If you’ve ever looked at a house listing and thought that the pictures looked awful, then this may be the real estate side hustle for you.

Real estate agents many times hire out for the photography side of selling a house, as they know and understand how important good pictures are.

Real estate photography is all about taking pictures of houses and spaces to grab the attention of people who might want to buy them. Real estate photographers might take pictures of the outside of a house, the backyard, the living room, attic, bathroom, and more.

You can start with the equipment you likely already have, like your smartphone, which can work well because phones these days have great cameras.

How you show a property can really impact a client’s chance of selling it. Your photos are not just pictures; they’re an important part of how the property gets advertised.

As you continue with this real estate side hustle, you might think about getting better equipment (like a real camera!), but for now, practice paying attention to details and getting better at taking pictures.

If you’re thinking about doing something extra to earn money in real estate, photography could be a great choice.

Recommended reading: 18 Ways You Can Get Paid To Take Pictures

6. Real estate drone photography

Drone pilots sell real estate photography services to help real estate agents showcase the properties they are selling.

When property listings include pictures from various angles and heights, it gives a different perspective compared to regular photos. This helps show aspects of real estate that traditional pictures might miss.

When you sell property photography services using your drone, you’re providing a valuable service to real estate companies that want to stand out in a crowded housing market.

Homes are increasingly being sold using drone photos, and it’s understandable because they can showcase the surroundings of a home. Also, potential home buyers can see the entire property and house through a drone picture, giving them a better understanding of what the home includes.

Recommended reading: How To Make Money With A Drone

7. Long-term rentals

A long-term rental is when you rent out a property for a long amount of time, usually six months to a year or even longer. An example would be renting out an apartment or house to a family to live in full-time.

Long-term rentals are different from short-term rentals like vacation homes or Airbnb listings. They are meant for people or families looking for a longer place to live.

A benefit of long-term rentals is the reliable and steady income they can give you. When you rent your property to tenants for an extended period, you set up a regular cash flow of rental payments. This stability can be especially nice for people who are looking for a dependable source of passive income.

Plus, it’s usually less work than a short-term rental, because you don’t have to clean the home every few days or find new people to rent out to.

Recommended reading: How This 34 Year Old Owns 7 Rental Homes

8. Buy and hold for long-term wealth

If you want to grow wealth through real estate, the buy-and-hold strategy is a way to achieve lasting growth. This means buying a property and keeping it for an extended period, benefiting from both its increasing value over time and the rental income it makes you over the years.

Some positives to think about with a buy-and-hold real estate side hustle include:

  • Appreciation: Over time, real estate often increases in value.
  • Rental income: It can provide a steady cash flow each month.
  • Tax advantages: Possible deductions can reduce your taxable income.

The buy-and-hold strategy requires patience and a willingness to handle market changes. It’s a long-term approach, not a quick one, but if you stay persistent, you can create an investment portfolio for future financial stability.

9. Notary services for real estate

If you want to get more into the real estate world without becoming an agent or broker, becoming a notary public can be a way to make extra money.

Many documents, including deeds, mortgages, and power of attorney, require notarization to be legally binding.

With a notarization license, you can provide an important service required for different real estate transactions.

Notaries are important because they help make sure that the people signing documents are who they claim to be to prevent fraud.

10. Rental arbitrage

Rental arbitrage is a way to make extra money in real estate without owning a property. You rent a place for a long time and then sublease it as a short-term rental using platforms like Airbnb.

Here’s how to get started:

  • Check local laws: You’ll want to make sure your city or state allows for short-term rentals.
  • Make sure the rental allows for you to do this: Not every rental will be okay with you renting it out. You will want to read your rental contract carefully.
  • Do market research: Understand the demand for short-term rentals in your target area, such as by looking for locations with high tourist traffic or business conferences.
Potential Benefits Considerations
+ Strong cash flow potential – Initial setup and furnishing cost
+ Low startup costs compared to buying – Dependence on short-term rental market stability

Making money in rental arbitrage comes from the difference between the cost of the long-term lease and the income from short-term rentals. The bigger the gap, the more potential for profit. But remember to factor in the expenses of running the rentals, like cleaning and maintenance costs.

11. House hacking

House hacking is a strategic approach to real estate where you purchase a property with multiple units and live in one unit while renting out the others. This is a side hustle because it can help offset your living expenses through the rental income.

House hacking can be an easy starting point if you want to dip your toes into real estate investing with the added perk of reducing your personal living expenses.

Back when we were living in a traditional house, we house hacked for a little while and had a few different roommates live with us. The monthly rent we collected allowed us to lower our house payments and put more money in savings. 

We house hacked with our first house, and it was really great for us. Being able to set more money aside even helped me get ready to quit my job to become a full-time blogger.

If you are looking for a good book on the subject of house hacking, then I recommend reading The House Hacking Strategy: How to Use Your Home to Achieve Financial Freedom by Craig Curelop.

Recommended reading: What Is House Hacking & How To Live For Free

12. Real estate agent

A real estate agent is a person who helps people, like you and me, find real estate to buy or sell. They usually earn their income through a commission, which is a percentage of the property’s sale price.

To become a real estate agent and start this real estate career, you only need a high school diploma and a professional license. As of 2021, the median pay, according to the U.S. Bureau of Labor Statistics, is $23.45 per hour, or $48,770 per year.

And, there are tons of real estate agents who make a lot more money than this.

13. Crowdfunding and peer-to-peer lending

If you want to learn how to make extra money in real estate, then crowdfunding and peer-to-peer lending are areas to look into.

Crowdfunding platforms allow you to invest in real estate deals with a smaller amount of money compared to purchasing property outright. This can provide you with passive income through rental returns or potential property value appreciation.

Peer-to-peer lending platforms enable you to lend money directly to borrowers. You can potentially earn higher returns compared to traditional savings accounts, but there is always the risk of a borrower not repaying the loan.

Both crowdfunding and peer-to-peer lending utilize technology to connect investors with individuals seeking funding.

14. Bird dogging

Bird dogging in real estate can be a side hustle where you help find potentially profitable properties for investors. Your skill in spotting undervalued or distressed properties is important.

Here’s what you usually need to do:

  • Conduct market research to locate properties that are flying under the radar.
  • Build a network with local real estate investors who are looking for deals.
  • Learn to use the Multiple Listing Service (MLS) to spot opportunities.

Typically, you’ll be on the lookout for foreclosures, bank-owned properties, and distressed homes due for a quick sale.

As a bird dog, your compensation usually comes from a referral fee after the investor decides to move forward with your find. Importantly, to perform this role, you don’t necessarily need any initial capital, just the time and skill to identify promising investment opportunities.

15. General contractor

General contractors handle the day-to-day activities on construction sites, overseeing tasks from residential remodels to constructing new homes.

This is typically more of a full-time job, but this can sometimes be done as a real estate side hustle.

As a general contractor, you can choose projects that match your schedule and interests, providing flexibility. Despite the responsibilities, this role allows you to play a central role in turning plans into actual buildings, giving you the potential to make extra money.

16. Flip raw land

Getting involved in raw land flipping is when a person finds and buys undeveloped land to sell later at a profit.

The main benefits include a lower initial investment and less complexity compared to traditional real estate investments, as it doesn’t involve renovation or improvements. There are no buildings, instead it may be a lot or acres of land.

Here’s a step-by-step guide on how to start:

  • Find raw land – Research areas with potential growth or upcoming developments that could boost land value.
  • Due diligence – Perform thorough checks on land titles, zoning laws, and road access to avoid legal issues.
  • Pricing strategy – Your selling price should be attractive enough for buyers yet ensure you make a reasonable profit margin.
  • Sell and negotiate – Use online platforms to reach potential buyers and negotiate the best deal.

17. Rent out your storage space

If you have unused land or space in your home, renting it out for storage space can be an easy way to make passive income.

People have a lot of stuff, and they will pay you to store their stuff in your unused spaces.

You can sell storage solutions for vehicles, boats, personal belongings, and more. You can rent out your parking space, closet, basement, attic storage, and more.

A site where you can list your storage space is called Neighbor and you can earn $100 to $400+ each month. This depends on the demand in your area and the type of storage space you are renting out.

Recommended reading: Neighbor Review: Make Money Renting Your Storage Space

18. Property manager

A property manager side hustle can be a great way to make extra money.

A property manager is a real estate professional who finds and oversees tenants, collects rent, and handles repairs and maintenance activities. It’s a side hustle that property owners pay for because they may not have the time or skills to effectively manage their own property.

Property managers can manage long-term rentals like apartments, short-term rentals like Airbnbs, and even commercial spaces as well.

I have a friend who is a property manager on the side of his full-time construction job – he manages many different types of properties, from second homes to vacation rentals to someone simply being out of town. He checks on their properties to make sure that everything is running smoothly.

19. Home stager

If you’re passionate about real estate and design, starting a side hustle as a home stager could be profitable for you. As a home stager, your job is to improve the appearance of a home before it’s listed for sale.

This often results in faster sales and higher prices, making your service valuable to sellers.

You can start by staging homes for friends or family, if possible, to build a portfolio. Before and after photos are powerful tools to showcase your work.

You can even provide consultations to homeowners who prefer to do the actual staging themselves. In such cases, your design style can be a more budget-friendly option for a do-it-yourself homeowner.

20. Home inspector

We recently bought a house, and our home inspector was actually a home inspector on the side – this was his real estate side hustle! I think he was a city inspector (or something similar) full-time, so he was very knowledgeable in the area.

Home inspection as a side job can be a strategic move if you’re interested in real estate. This job allows for flexibility since you can set your hours, such as by completing home inspections on the weekends or before or after your day job.

You’ll need to invest in proper training and get licensed, which is a process that can be completed relatively quickly.

The responsibilities of a home inspector include:

  • Inspecting homes for possible problems, like a leak or bad wiring.
  • Creating and delivering reports based on what you find during the inspection.

21. Real estate appraiser

Real estate appraisers determine the fair market value of a property, and this process is important in transactions, such as home sales and refinances.

Appraisers assess property values by taking notes on unique characteristics and comparing them with similar properties that have sold recently.

They then prepare reports, detailing findings and providing a valuation that banks and other institutions depend on for loans.

22. Real estate wholesaler

Real estate wholesalers are middlemen who find properties under market value, contract them with the seller, and then sell the contract to a buyer, often an investor. Their profit comes from the difference between the contracted price with the seller and the amount the buyer pays.

Here is a quick summary of what a wholesale real estate side hustle is:

  1. Find a distressed property – Search for properties that can be bought below market value.
  2. Evaluate the property – Determine the After Repair Value (ARV) and estimate repair costs.
  3. Secure under contract – Enter into a contract with the seller, giving you the right to purchase.
  4. Find a buyer – Locate an investor interested in buying the contract.
  5. Assign the contract – Transfer your purchasing rights to the investor for a fee.

By becoming skilled at finding good deals and building connections with trustworthy investors, real estate wholesaling can become a profitable real estate side hustle.

23. Start a real estate blog

Starting a real estate blog (or even a real estate YouTube channel or social media account!) can be a good way to make extra money without having to spend a lot of money.

With a real estate blog, you can write about local market insights, home buying and home selling tips, property investment strategies, home improvement and DIY projects, and more.

I have been a blogger for years, and I really love it. I am able to create my own schedule, decide how I make money online, travel whenever I want, and more. And, it all started on the side of my day job – so I definitely think that a real estate blog can be started as a side hustle.

Learn more at How To Start A Blog FREE Course.

Frequently Asked Questions

Below are answers to common questions about real estate side hustles.

Can real estate be a side hustle? Is real estate a good side hustle?

Yes, real estate can be a lucrative side hustle. Many people do real estate activities on a part-time basis, which can include short-term rentals, getting a roommate, and more, with lower time commitments.

Is real estate worth it as a side hustle?

Real estate as a side hustle can be worth it if you are looking for more income streams and have an interest in the housing market or real estate. As you probably noticed above, there are many different kinds of side hustles, so the amount of money you can earn or the amount of time you will spend will just depend on the gig you choose.

How can realtors make extra money?

Realtors can make extra money by managing rental properties, taking part in real estate crowdfunding, selling real estate photography services, and more.

Is real estate a good side hustle for teachers?

Yes, real estate can be a good side hustle for teachers. There are many options that may work for a teacher.

For example, some teachers work as real estate agents on the side. This is possible because you can handle listing and selling homes during weekends, breaks, evenings, and over the summer. However, keep in mind that selling homes might pose challenges, as clients may require your full attention during the day, which could clash with your teaching commitments.

You can find more ideas at 36 Best Side Jobs for Teachers To Make Extra Money.

Which licenses might be required to pursue a side hustle in the real estate field?

Depending on the side hustle, certain licenses like a real estate license may be required. For example, to become a real estate agent or home inspector, you’ll need a specific license. However, if you’re looking into just getting a roommate, then you may not need a license. It all just depends on the real estate side gig you are interested in.

How to make money in real estate without ever buying any property?

As you learned above, you don’t need to personally buy or own real estate in order to make money in real estate. You can invest in REITs, become a notary for real estate transactions, include affiliate marketing for real estate products on a blog, and more.

Real Estate Side Hustles – Summary

I hope you enjoyed this article about real estate side hustles.

Picking the right side hustle gig in real estate might feel overwhelming because there are many choices.

Some people might like jobs where you have to do more, like fixing up houses or taking care of Airbnb rentals. Others might prefer making money without doing much, like through REITs or renting out a spare room.

Whatever you’re into or however much money you have to invest, there are probably real estate side business ideas that fit with what you have and what you want to achieve.

What do you think is the best real estate side hustle?

Recommended reading:

Source: makingsenseofcents.com

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When it comes to investing for the future, the magic of compound interest can be a powerful tool. By placing your money in the stock market, you’re allowing it to grow over time with relatively little effort. However, understanding how to allocate your assets properly and diversify your investment portfolio can be a daunting task. That’s where exchange-traded funds (ETFs) and mutual funds come into play.

Both ETFs and mutual funds offer simple and effective ways to diversify your stock portfolio without having to buy individual stocks. They allow you to spread your investment across numerous stock options, reducing your overall risk and increasing your chances of growth.

In this article, we’ll dive deeper into the differences between ETFs and mutual funds, their pros and cons, and how to determine which one is right for your personal investment goals.

What’s the difference between ETFs and mutual funds?

At their core, both ETFs and mutual funds are pools of money invested in an array of stocks, bonds, and potentially other securities and assets. These investments are managed by third-party individuals or corporations, alleviating the need for you to perform extensive research and manual transactions to gain market exposure.

The Key Differences

While ETFs and mutual funds share similarities, there are several key differences that can impact your decision when choosing the right investment vehicle for your portfolio:

  1. Active Management: Mutual funds (except for index funds) are actively managed by qualified financial professionals who monitor and adjust the fund’s assets based on market performance. This can provide a sense of security for long-term investors. ETFs, on the other hand, are typically passively managed and track a specific index or sector.
  2. Trading Flexibility: ETFs can be traded on a daily basis, just like individual stocks, allowing investors more control over their investments. Mutual funds can only be bought and sold at the end of the trading day at their Net Asset Value (NAV).
  3. Investment Minimums: ETFs generally have lower initial investment requirements than mutual funds, as you can often buy a single share at a relatively low price. Mutual funds typically have higher minimum investment thresholds.
  4. Fees and Expenses: ETFs often have lower expense ratios and fewer fees compared to mutual funds. This can be attributed to their passive management style and lower operating costs.

ETF vs. Mutual Fund: Pros and Cons

To help you decide which type of investment is best for your goals, let’s dive deeper into the advantages and disadvantages of ETFs and mutual funds.

ETFs

Pros:

  • Lower start-up investments: With the ability to buy a single share, ETFs often have lower initial investment requirements compared to mutual funds.
  • Lower fees: ETFs typically have lower expense ratios, and fewer additional fees like marketing and distribution costs.
  • Greater transparency and flexibility in trading: ETFs can be traded like stocks throughout the day, and their holdings are usually disclosed daily. This offers more control and transparency for investors.
  • Tax efficiency: ETFs tend to be more tax-efficient, potentially resulting in lower tax liabilities for investors.

Cons:

  • Lack of active management: Most ETFs are passively managed, so investors looking for professional oversight may prefer mutual funds.
  • Potential trading costs: While ETFs generally have lower expense ratios, frequent trading could result in higher transaction costs, offsetting their cost advantages.

Mutual Funds

Pros:

  • No commissions on trades: Mutual funds can be bought and sold without paying additional commission fees, which may be beneficial for investors who trade frequently. Some brokerages also offer commission-free ETFs, but these may have higher expense ratios than other ETFs on the market.
  • Active management: Mutual funds are more likely to be actively managed by financial professionals, which can be appealing to investors seeking expert oversight and decision-making.
  • Automatic investments and withdrawals: With mutual funds, you can set up automatic transactions, making it easier to invest and withdraw funds on a consistent basis.

Cons:

  • Higher fees: Mutual funds typically have higher expense ratios and additional fees compared to ETFs, which can eat into your returns over time.
  • Less trading flexibility: Mutual funds can only be bought and sold at the end of the trading day at their NAV, offering less control and flexibility than ETFs.
  • Potential capital gains tax liabilities: Due to their structure, mutual funds may result in increased capital gains taxes and subsequently, higher tax obligations for investors.

Choosing the Right Investment Vehicle for Your Personal Portfolio

Ultimately, the best choice between an ETF and a mutual fund depends on your individual financial goals, risk tolerance, and investment preferences. Both options provide broad market exposure with relatively low effort and expense, but you may find one more appealing based on your unique circumstances.

Considerations for ETFs:

  • If you have limited funds to invest initially, ETFs may be a more accessible option due to their lower start-up investments.
  • If you prefer more control over your investments and the ability to trade throughout the day, ETFs offer the flexibility you’re looking for.
  • If tax efficiency is a priority, ETFs tend to have a lower overall tax liability compared to mutual funds.

Considerations for Mutual Funds:

  • If you value the expertise and oversight of financial professionals, actively managed mutual funds may be a better fit.
  • If you plan to trade frequently and want to avoid commission fees, mutual funds could be more cost-effective.
  • If you prefer the convenience of automatic investments and withdrawals, mutual funds allow for easy setup and management of recurring transactions.

A Balanced Approach: Combining ETFs and Mutual Funds in Your Portfolio

It’s important to note that you don’t have to choose exclusively between ETFs and mutual funds. Many investors find value in incorporating both investment vehicles into their portfolios to capitalize on the benefits of each. By combining the two, you can create a diversified, balanced investment strategy that caters to your individual needs and preferences.

For example, you might allocate a portion of your portfolio to low-cost, passively managed ETFs for broad market exposure and tax efficiency, while also investing in actively managed mutual funds for targeted growth opportunities and professional management. This approach allows you to take advantage of the unique strengths of each investment vehicle, potentially leading to better long-term returns and a more resilient portfolio.

Understanding the Mechanics of ETFs and Mutual Funds

To fully comprehend the differences, let’s take a look at their underlying mechanics and how they function within the investment landscape.

Creation and Redemption Process

ETFs:

ETFs are created and redeemed through a process involving authorized participants (APs) – typically large financial institutions. When creating new ETF shares, APs assemble a portfolio of underlying securities that mirrors the ETF’s composition and deliver it to the ETF issuer.

In exchange, the issuer provides the AP with ETF shares, which can then be sold on the open market. The redemption process is the reverse of this, with APs exchanging ETF shares for the underlying securities.

This creation and redemption process helps maintain an ETF’s market price close to its NAV. If the market price deviates significantly from the NAV, APs can capitalize on the arbitrage opportunity by creating or redeeming ETF shares, which in turn, helps bring the price back in line with the NAV.

Mutual Funds:

Unlike ETFs, mutual funds do not involve APs or the creation and redemption process. Instead, mutual fund shares are created and redeemed directly with the fund company at the end of the trading day, based on the NAV. As a result, mutual funds are not subject to the same intraday price fluctuations as ETFs and do not rely on an arbitrage mechanism to maintain a consistent market price.

Portfolio Management Strategies

ETFs:

The majority of ETFs are passively managed, meaning they aim to replicate the performance of a specific index or sector. This passive approach results in lower management fees and operating costs compared to actively managed funds. However, there has been a recent surge in the popularity of actively managed ETFs, which attempt to outperform their respective benchmarks through the expertise of portfolio managers.

Mutual Funds:

Mutual funds can be either actively or passively managed. Actively managed mutual funds rely on the expertise of a fund manager to select and manage the underlying securities in an effort to outperform the market.

This active management can lead to higher fees and expenses due to increased research, trading, and operational costs. Passively managed mutual funds, also known as index funds, seek to replicate the performance of a specific index or benchmark, resulting in lower fees and expenses.

Assessing Performance: ETFs vs. Mutual Funds

When comparing the performance, there are several factors to consider, such as historical returns, risk-adjusted performance, and consistency of results.

Historical Returns

While past performance is not necessarily indicative of future results, analyzing historical returns can provide valuable insight into how an investment vehicle has performed over time. Comparing the average annual returns of ETFs vs. mutual funds over various time horizons (e.g., 1-year, 3-year, 5-year, and 10-year periods) can help you gauge their relative performance.

It’s important to remember that individual ETFs and mutual funds can vary significantly in their returns based on their underlying investments, management strategies, and fees. Therefore, it’s crucial to analyze the performance of specific funds that align with your investment objectives rather than relying solely on broad industry averages.

Risk-Adjusted Performance

To effectively compare the performance of ETFs and mutual funds, it’s essential to consider the level of risk associated with each investment. Risk-adjusted performance measures, such as the Sharpe Ratio, can help you evaluate an investment’s return relative to its risk. A higher Sharpe Ratio indicates a better risk-adjusted return, allowing you to compare investments with different risk profiles more accurately.

When comparing mutual funds and ETFs, consider the risk-adjusted performance of each to determine which investment vehicle offers a more favorable balance between potential returns and associated risks.

Bottom Line

When it comes to deciding between ETFs and mutual funds, there’s no one-size-fits-all answer. By understanding the key differences, pros and cons, and how each investment vehicle aligns with your personal financial goals, you can make an informed decision that best suits your needs.

Remember to continually evaluate your investment strategy and make adjustments as needed. As your financial goals and circumstances change, your ideal mix of ETFs and mutual funds may also evolve. By staying informed and adaptable, you’ll be well-equipped to keep up with the ever-changing world of investing and work towards a successful financial future.

Source: crediful.com

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Investing has become much easier over the years thanks to the popularity of robo-advisors. Rather than working with a human financial advisor, a robo-investing uses algorithms to make a wealth management plan for each investor.

There are many advantages to using these services. Robo-advisors are typically less expensive than hiring a financial advisor. They allow you to start investing in the stock market even if you don’t have much money to start with.

So if you’re looking for an easy, inexpensive way to get started with investing, a robo-advisor could be a great option for you.

10 Best Robo-Advisors: Uncovering the Standout Performers

Here is an overview of our top picks for the best robo-advisors, as well as a brief explanation about what we like about each one:

1. Personal Capital

Key Features:

  • Hybrid robo-advisor with access to human financial advisors
  • Advanced investment strategies including tax optimization
  • Comprehensive financial planning tools
  • Retirement and savings goal tracking
  • High minimum balance requirement

Who it’s best for:

Personal Capital is ideal for more advanced investors with higher account balances, as well as those who seek a combination of automated investing with human financial advisor support.

Its comprehensive planning and retirement tracking features make it a powerful platform for long-term wealth management.

2. Wealthfront

Key Features:

  • Diversified portfolios with 11 different asset classes
  • Tax-loss harvesting for all investment accounts
  • High-interest cash account
  • Automatic rebalancing and portfolio optimization
  • College savings plan (529) support

Who it’s best for:

Wealthfront is a strong option for investors seeking a fully automated robo-advisor with a focus on tax efficiency and diversified investments.

Its high-interest cash account and college savings plan support make it an attractive choice for those looking to cover various financial goals.

3. Betterment

Key Features:

  • Goal-based investing tailored to personal milestones
  • Automatic rebalancing and tax-efficient strategies
  • Socially responsible investing options
  • Access to human financial advisors (with premium plan)
  • No minimum account balance

Who it’s best for:

Betterment is a great choice for beginners and experienced investors alike, who want a goal-oriented approach to investing.

With its socially responsible investing options and access to a licensed advisor (with the premium plan), it provides a well-rounded platform for a variety of investors.

4. Ally Invest

Key Features:

  • Low account minimum and no trading commissions
  • User-friendly online platform
  • Various research-based tools
  • No advisory fees for managed portfolios
  • Integration with Ally Bank for seamless banking and investing

Who it’s best for:

Ally Invest is an excellent option for new investors looking for a low-cost, user-friendly platform with no trading commissions.

Its integration with Ally Bank makes it a convenient choice for those who want to manage their banking and investing under one roof.

5. Vanguard

Key Features:

  • Hybrid robo-advisor with access to Vanguard personal advisor services
  • Low-cost, diversified investment options
  • Retirement and college savings plans
  • Strong reputation and established history
  • Higher minimum investment compared to other robo-advisors

Who it’s best for:

Vanguard Digital Advisor is ideal for investors seeking a trusted, established provider with a focus on low-cost, diversified investments.

Its hybrid model offers the benefits of automated investing along with access to a human advisor, making it a strong option for those with larger account balances.

6. M1

Key Features:

  • Fractional share investing
  • Customizable portfolios or pre-built expert portfolios
  • No management fees or commissions
  • M1 Borrow feature allows borrowing against your portfolio
  • M1 Spend feature integrates banking and investing

Who it’s best for:

M1 Finance is well-suited for investors who want a high level of customization with their portfolios, allowing them to create their own investment “pies” or choose from pre-built expert portfolios.

As a cost-effective solution, it appeals to budget-minded investors who appreciate the opportunity to leverage their portfolio through borrowing or take advantage of integrated banking services.

7. Ellevest

Key Features:

  • Focus on socially responsible investing
  • Gender-specific investment advice
  • Goal-based investing approach
  • Access to career coaching and financial planners
  • Low fees

Who it’s best for:

Ellevest is an excellent choice for investors who prioritize socially responsible investing and seek a platform tailored to the unique financial challenges faced by women.

Its goal-driven approach, coupled with access to career coaching and financial planners, makes it a comprehensive platform for value-oriented investors.

8. Facet

Key Features:

  • Comprehensive financial planning services
  • Access to dedicated Certified Financial Planner (CFP)
  • Flat-fee pricing model
  • No account minimums
  • Not fully automated

Who it’s best for:

Facet Wealth is ideal for individuals who want personalized investment management services but can’t afford the fees associated with traditional financial advisors.

Its flat-fee pricing model and access to a dedicated CFP provide a high level of personalization and support, making it a valuable option for those seeking a more hands-on approach to wealth management.

9. SoFi Automated Investing

Key Features:

  • No management fees
  • Low minimum balance requirement
  • Automatic rebalancing
  • Access to certified financial planners
  • Robust customer service

Who it’s best for:

SoFi Automated Investing is an excellent option for investors seeking a low-cost, accessible platform with strong customer support.

With no account fees and a low balance requirement, it’s a great choice for those just starting their investment journey or those who want access to financial planning resources without paying high fees.

10. Blooom

Key Features:

  • Focus on retirement savings (401(k)s and IRAs)
  • No minimum account balance requirement
  • Flat yearly management fee
  • 401(k) analysis and optimization
  • Auto rebalancing and investment recommendations

Who it’s best for:

Blooom is a standout option for investors looking to optimize their retirement savings, specifically in 401(k)s and IRAs.

With its flat yearly management fee and no minimum account balance requirement, it’s an accessible platform for those who want to improve their retirement investment approach and maximize their long-term returns.

A Side-By-Side Comparison of the Best Robo-Advisors

Listed below is a side-by-side overview of what each robo-advisor has to offer.

BROKER FEES PROMOTION ACCOUNT MINIMUM
Ally Invest 0.0% No promotions offered $100
Personal Capital 0.49%-0.89% No promotions offered $100,000
Wealthfront 0.25% $5,000 in assets managed for free $500
Betterment 0.25% A year of free management $0
FutureAdvisor 0.50% Three months of free management $10,000
Vanguard 0.30% No promotions offered $50,000
Bloom $10 per month $10 off first year $0
M1 Finance 0.0% No promotions offered $0
Ellevest 0.25% Possible $750 cash bonus $0
Facet Wealth $480 per year or more No promotions offered $0
SoFi Automated Investing 0.0% Free career counseling and loan discounts $100
Wealthsimple 0.40%-0.50% $10,000 in assets managed for free $0

How do robo-advisors work?

A robo-advisor is a specialized software that provides automated investment portfolios based on your goals and risk tolerance. Your risk tolerance is based on your answers to the questions provided.

Robo-advisors use algorithms to choose the right asset allocation based on your risk tolerance, investment goals, and time horizon, providing a customized and efficient approach to portfolio management. Some services give you access to human advisors as well.

Robo-advisors are a viable option for anyone who wants to start investing but can’t afford a portfolio management firm. Or if you just want a hands-off approach to investing, robo-investing is a great choice for diversifying your investments. These services typically have low management fees and require low account minimum balances.

So if you don’t have tens of thousands of dollars at your disposal but still want to start building an investment portfolio, using a robo-advisor has a much lower barrier to entry. There are many online services available on the market, but the ones listed above stand out from the pack.

How to Choose the Right Robo-Advisor for Your Needs

Selecting the right robo-advisor requires considering your investment goals, risk tolerance, and personal preferences. Here are some factors to help guide your decision-making process:

1. Determine your investment goals

Before choosing a robo-advisor, it’s essential to outline your financial goals. Are you saving for retirement, building an emergency fund, or working towards another specific milestone? Understanding your objectives will help you find a robo-advisor that aligns with your needs and offers relevant services.

2. Assess your risk tolerance

Risk tolerance refers to your comfort level with the potential fluctuations in the value of your investments. Some investors prefer a conservative approach, while others may be willing to take on more risk for potentially higher returns. Choose a robo-advisor that offers investment options aligned with your risk tolerance and provides suitable recommendations based on your preferences.

3. Compare fees and account minimums

Fees and account minimums are crucial factors to consider when selecting a robo-advisor. Some platforms charge a percentage of your assets under management, while others may have a flat fee.

Additionally, account minimums can vary widely, ranging from no minimum to tens of thousands of dollars. Choose a robo-advisor with a fee structure and minimum investment requirement that suits your financial situation.

4. Review available investment options

Different robo-advisors offer varying investment options, including individual stocks, bonds, ETFs, and mutual funds. Some platforms may also provide access to socially responsible investments or other specialized options. Ensure the robo-advisor you choose offers options that align with your goals and values.

5. Consider additional features and services

Many robo-advisors offer added features and services, such as automatic rebalancing, tax-loss harvesting, and access to human advisors. Some platforms may also provide banking services or wealth management tools. Assess which additional features are important to you and select a robo-advisor that meets your requirements.

6. Evaluate the user experience

The user experience, including the platform’s ease of use, customer support, and educational resources, is an essential aspect of choosing a robo-advisor. Look for platforms with intuitive interfaces, responsive customer service, and helpful resources to guide you through the investment process.

7. Read reviews and testimonials

Researching reviews and testimonials from current users can provide valuable insight into a robo-advisor’s performance, customer satisfaction, and any potential issues you may encounter. Look for reviews from reputable sources and users with similar objectives and investment preferences to ensure the robo-advisor is the right fit for your needs.

What should you look for in a robo-advisor?

When researching robo-advisors, it’s crucial to know what features and qualities are essential for a successful investment experience. Here are five things you should keep in mind when you’re considering different services.

  • Management fees: Most robo-advisors will charge an annual fee. This is usually calculated as a percentage of your total assets. You should make sure you understand the management fee structure because this will cut into your earnings.
  • Types of accounts offered: You should make sure you have a general understanding of the different accounts offered. For instance, retirement accounts like Roth IRAs and 401(k)s will have limits on how much you can contribute each year. Make sure you understand the difference between a taxable investment account and tax-deferred or tax-free accounts offered and how they benefit your financial goals.
  • Investments: It’s a good idea to familiarize yourself with the types of investments offered. For instance, many robo-advisors offer low-cost index funds, mutual funds, and ETFs. You should make sure that you like the accounts being offered and that they are fairly low cost.
  • Rebalancing: Since your investment portfolio will fluctuate, over time, it’s easy for it to become out-of-sync with your overall investing goals. You should look for a company that offers automatic portfolio rebalancing.
  • Access to financial advisors: And finally, one of the benefits of using a robo-advisor is that it’s a hands-off approach to investing. But some robo-advisors offer access to financial planners, and this offers many benefits. Having a financial planner involved brings a human element to your portfolio and makes it more personalized.

An Explanation of the Different Investment Options Available through Robo-Advisors

Robo-advisors provide investors with a variety of investment options to create a well-diversified portfolio tailored to their risk tolerance and financial objectives. Understanding the different options available can help you make informed decisions about your portfolio. Here are some of the most common options offered by robo-advisors:

1. Exchange-Traded Funds (ETFs)

ETFs are a popular investment option among robo-advisors due to their low costs and broad diversification. An ETF is a collection of securities, such as stocks, bonds, or commodities, that tracks a specific index or sector. ETFs trade on stock exchanges, just like individual stocks, and offer investors exposure to a wide range of asset classes, industries, and regions.

2. Index Funds

Index funds are mutual funds that track the performance of a specific market index, such as the S&P 500 or Nasdaq Composite. Like ETFs, they provide broad diversification and have low management fees. By investing in an index fund, you’re essentially buying a small piece of every company within that index, reducing the overall risk in your portfolio.

3. Mutual Funds

Mutual funds pool the investments of multiple investors to purchase a diversified portfolio of stocks, bonds, or other securities. They are less common in robo-advisor portfolios due to their higher fees compared to ETFs and index funds, some robo-advisors still include them as an investment option, particularly for specific sectors or strategies.

4. Bonds

Bonds are debt securities issued by governments, corporations, or other entities to raise capital. When you invest in a bond, you’re essentially lending money to the issuer in exchange for periodic interest payments and the return of the principal amount at the bond’s maturity. Bonds are typically considered less risky than stocks and can provide a steady income stream, making them a popular choice for conservative investors or those nearing retirement.

5. Real Estate Investment Trusts (REITs)

REITs are companies that own, operate, or finance income-producing real estate properties. They allow investors to gain exposure to real estate investments without the need to buy or manage properties directly. REITs can provide diversification and income potential to a portfolio, as they typically pay regular dividends from the rental income generated by their properties.

6. Socially Responsible Investing (SRI) and Environmental, Social, and Governance (ESG) Funds

SRI and ESG funds focus on investments in companies that meet specific ethical, environmental, social, or governance criteria. These funds allow investors to align their investment portfolios with their values and support businesses that have a positive impact on society and the environment. Some robo-advisors offer SRI and ESG options to cater to the growing demand for responsible investing.

7. Target-Date Funds

Target-date funds are designed to simplify long-term investing, particularly for retirement planning. These funds automatically adjust their asset allocation over time, gradually shifting from higher-risk investments like stocks to more conservative investments like bonds as the target retirement date approaches. This helps investors maintain an age-appropriate risk level in their portfolios without needing to make manual adjustments.

Tips for Monitoring and Adjusting Your Investment Strategy with a Robo-Advisor

While robo-advisors are designed to automate much of the investment process, it’s essential to periodically review your investment plan and make adjustments as needed. Here are some tips for monitoring and adjusting your strategy when using a robo-advisor:

1. Regularly review your risk tolerance and investment goals

Your risk tolerance and investment goals may change over time due to personal circumstances or market conditions. Ensure you update your robo-advisor profile to reflect any changes, as this will help the platform adjust your portfolio to align with your current objectives and risk appetite.

2. Monitor your portfolio performance

Keep an eye on your portfolio’s performance and compare it to relevant benchmarks or other investment options. This will give you an idea of whether your robo-advisor is effectively managing your investments and meeting your expectations. If your portfolio consistently underperforms, it may be time to consider other investment strategies or try a different robo-advisor.

3. Rebalance your portfolio as needed

While many robo-advisors automatically rebalance your portfolio, it’s still a good idea to review your investments periodically. If you notice significant deviations from your target allocation or if your investment goals change, you may need to adjust your portfolio accordingly.

4. Stay informed about market trends and developments

Even though robo-advisors handle most of the investment decisions for you, it’s essential to stay informed about market trends and developments. This will help you better understand your portfolio’s performance and make more informed decisions about any adjustments you may need to make.

5. Evaluate the robo-advisor’s features and offerings

Periodically review the features and offerings of your robo-advisor to ensure they still align with your needs and preferences. Some robo-advisors may introduce new investment options, tools, or services that could benefit your investment strategy. If you find a different robo-advisor that better suits your needs, don’t hesitate to switch.

6. Consider seeking professional advice

If you have concerns about your investment approach or need help understanding complex financial situations, consider consulting a certified financial planner or other financial professional. While a robo-advisor can be an excellent option for many investors, there may be times when personalized advice from a human advisor is necessary.

Bottom Line

Robo-advisors are an excellent solution for investors seeking a low-cost, user-friendly approach to growing their wealth. They provide the advantages of professional portfolio management and access to diverse investment options without the hefty fees typically associated with traditional financial advisors.

As you embark on your investment journey, remember to consider your long-term goals, risk tolerance, and personal values when selecting a robo-advisor. Make sure to evaluate management fees, account types, and available investment options to ensure your chosen platform aligns with your investment strategy.

Keep an eye on your portfolio and leverage the tools and features offered by your robo-advisor to maximize returns, optimize asset allocation, and stay on track to achieve your financial goals.

By understanding the full potential of robo-advisors and making informed decisions about your investments, you can confidently take charge of your financial future and reap the rewards of a well-managed, diversified portfolio.

Source: crediful.com

Apache is functioning normally

On average, members of the baby boomer generation saved approximately $4,060 over the course of 2023, lagging behind the average savings levels of every other surveyed generation. This is according to the newest edition of the “Wealth Watch” survey conducted by New York Life Insurance Co.

By comparison, millennials (ages 28 to 43 last year) led all age groups with an average savings of about $9,300. Members of Generation Z (ages 12 to 27) were next at $6,441 per person, followed by Generation X (ages 44 to 59) at $5,132.

Still, the survey found that financial resiliency was a trait exhibited by most respondents last year.

“[We found] financial resiliency among American adults, even in the face of high interest rates and rising credit card debt,” New York Life said in an announcement of the results. “Two-thirds of adults (64%) feel confident in their ability to meet their financial goals, and over half (52%) of adults saved the amount they wanted or more in 2023.”

While there was a discrepancy between the amount adults intended to save ($7,435.57 on average) compared to actual savings ($6,138.06), the results still marked an improvement in the total savings metric from 2022. That year, adults aimed to save $5,437 but only saved $5,011 on average.

“Our data clearly show that having a financial strategy is a key factor in not only feeling confident about reaching one’s goals, but in actually reaching them,” said Donn Froshiesar, who leads consumer insights at New York Life. “Younger generations are reporting strong engagement with their financial strategies.”

Members of Gen Z and millennials were more likely to report weekly savings strategy reviews and a desire to seek input from a financial professional compared to the other demographics, Froshiesar said. But the picture was not entirely rosy for these younger generations.

“But despite evidence of strong habits, debt is still getting in their way,” Froshiesar explained.
“Gen Zers ranked credit card debt as the second most impactful factor on their finances in 2023 behind inflation.”

Baby boomers and millennials were equal in their outlook for having the ability to reach their savings goals at 64%, according to the survey. Gen Z is far and away the most confident cohort in this area (76%), while Gen X posted the lowest confidence score (55%).

Men (75%) also demonstrated far more confidence in meeting their financial goals than women (57%), with married men and women being slightly more confident overall (77% for married men; 59% for married women).

When providing perspective about the survey results to CNBC, Froshiesar was not surprised at how the data broke down demographically.

“Gen Xers and boomers may be more focused on funding children’s college educations, caring for an aging parent, saving for retirement or even entering a phase where they are spending down assets in retirement rather than saving,” he said.

Source: housingwire.com