Robots or Humans for Your Investment Portfolios?
As long as the market existed, participants of the market have been trying to find the magic wand to turn their investments into fortunes. Now they have the new and exciting tools that usually are described as robo investing. Is that working for them?
We are at the early stages of this exciting experiment and only time will show if this works better than a “Wonderful Human Mind”.
One pattern that is very useful is a very simple momentum play discovered by Dr. Clifford Asness – he received a PhD. for this work and got three billion dollars to manage (AQR Capital Management).
He formalized the strategy known as momentum factor”. Basically, it says that if the stock starts to go up, it will continue to do so for some time. There are many factors like that to consider. Just to name a few: book-to-market ratio, P/E Ratio, 50 days moving average, Bollinger Bands, etc.
However, the ability of the manager to play chess is not a factor. Of course, computers are very good at analyzing multiple factors, and there are many new ETF’s that completely rely on factor analysis. There is a claim that factor investing will replace one day even the best fund managers.
We are at the beginning stages of this experiment. Let’s wait and see – but be very careful before jumping on the bandwagon of completely stripping your investments from a human touch.
Contributor
Sergey Savastiouk, Ph.D. has a degree in Applied Mathematics from Moscow University and has extensive experience as an entrepreneur, investor, manager, and mathematician. His professional expertise is in applied mathematics, mathematical modeling, system and pattern analysis, and software and hardware system integration. He has served as the CEO of several hi-tech start-up companies and nonprofit organizations, which has given him proven capabilities in business strategy for high-tech start-up companies, market assessment, company formation, team building, product development, marketing, and sales. He has published numerous articles in journals and magazines on related fields. As a retail investor, he spent 15 years developing his proprietary trading and quantitative algorithms (now Tickeron’s A.I.), which brought him significant returns in trading the stock market. His current work and goal in founding Tickeron is to bring professional, sophisticated stock market analysis capabilities to retail investors via an easy-to-use interface.
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