The Battle Between Man and Machine
Top 5 of the Week of May 30
In this week’s Top 5, we open with Cullen Roche of Pragmatic Capitalism observing the slowdown in Robo Advisor growth. Dan Wyson from The Spectrum writes about the impact of living in an age of TMI (Too Much Information). And Mike Swanson from Wall Street Window draws an interesting correlation between Google Trends and market sentiment.
Just as the old adage, “Quis custodiet ipsos custodes?” asks (Who guards the guards themselves?”), Ben Carlson, of A Wealth of Common Sense, highlights this week; with no one overseeing the overseers, clients are left to fend for themselves when judging those in charge of their money. And Michael Batnick from the Irrelevant Investor has ten observations for us after analyzing the birth dates of some of the greatest investors of all time.
The Battle of Advisors: Robos Vs. Humans
- A Robo cannot act in an “advisory” manner; they can’t accurately assess your financial situation or support and help you adapt in times of financial crisis
- Robos create funds nearly identical to the Vanguard Three Fund Portfolio, which with experience could be self-managed while retaining the benefits you’d receive from a Robo Advisor—but without the fees
- Though they lack the ability to balance risk profiles—tending towards more aggressive portfolios—the slowdown in their growth is likelier to lead to lower human advisor’s fees rather than their demise
Suffering From TMI
- Since the information age kicked in around 20 years ago, companies’ stock prices can nosedive off the back of “a single social media comment, a bad review, or a viral video”
- Information risk: before, publicity—both good and bad—was in the control of a few, but now with the internet, it’s in the hands of the masses
- Investors should proceed with caution when choosing individual stocks; be aware that information now moving at lightening speeds has the potential to have both positive and negative effects
Google Trends: The New Measuring Tool for Market Sentiment?
- Searches for “market manipulation” spike on Google during low points in market cycles
- Yet these searches drop when people are making money; demonstrating a lack of interest in manipulation only as long as they’re succeeding
- A canny investor, therefore, could follow Google trends to keep a watchful eye on market sentiment to exploit these periods and invest
“Experts” Setting Their Own Benchmarks
- Though trust is a large factor, those outsourcing their investment advice should be aware of these red flags
- Charlatans will change the rules if their performance isn’t up to scratch, and alter their strategies, maybe after a time of underperformance—increasing risk to your portfolio, rather than mitigating it
- They will be inconsistent with their investment narratives, and shift the blame to someone, anyone else, but themselves
Encountered one or more of these red flags? Share your experiences in the comments section below
A List Dominated By Baby Boomers
- Interesting to observe that not one of the most important investors of all time worked on Wall Street during the Great Depression
- The 1950’s was a prime decade: starting low and finishing high, during which Jack Bogle, Warren Buffett, George Soros, Julian Robertson, Ed Thorp, William O’Neil, and Carl Icahn began their careers
- With the average 25-year total return on the S&P 500 being 1463% during their careers’, not only were they all obviously smart but born at the right time, with “the wind at their back”
Top 5 of the Week is a summarized collection of financial investment articles that we like and think you might like too. Having written thousands of pages of equity strategy and company research between us, we understand the allure of the ever-changing world of finance. Investing is an art form – and like everything, something you can work on and improve at. There are some excellent writers out there on the finance web, some offer a running commentary on today’s market, some are doing research, some have tips on how to Become a Better Investor, and some just lift the cloud of fog behind a lot of financial jargon. Each week we will keep you up to date with the top 5 articles worthy of your attention.
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