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Multiple Choice
Which of the following statements about robo-advised investing is true?
A
Robo-advisors require clients to meet in person with a financial advisor before investing.
B
Robo-advisors only invest in individual stocks selected by the client.
C
Robo-advisors use algorithms to provide automated investment advice based on client preferences and risk tolerance.
D
Robo-advisors are not regulated by any financial authorities.
Verified step by step guidance
1
Understand the concept of robo-advised investing: Robo-advisors are digital platforms that provide automated financial advice and portfolio management using algorithms. They are designed to simplify investing for clients by tailoring recommendations based on their financial goals, preferences, and risk tolerance.
Evaluate the first statement: 'Robo-advisors require clients to meet in person with a financial advisor before investing.' This is incorrect because robo-advisors operate entirely online and do not require in-person meetings.
Evaluate the second statement: 'Robo-advisors only invest in individual stocks selected by the client.' This is incorrect because robo-advisors typically invest in diversified portfolios, often using exchange-traded funds (ETFs), rather than individual stocks chosen by the client.
Evaluate the third statement: 'Robo-advisors use algorithms to provide automated investment advice based on client preferences and risk tolerance.' This is correct because robo-advisors rely on algorithms to analyze client data and create personalized investment strategies.
Evaluate the fourth statement: 'Robo-advisors are not regulated by any financial authorities.' This is incorrect because robo-advisors are subject to regulation by financial authorities, such as the SEC in the United States, to ensure compliance with investment laws and protect clients.