In retrospect the markets impressive recovery from the
well-advertised, if not well organized, lists of impediments to investor
confidence is all the more impressive since most of the said impediments still
exist. That’s because the market is
becoming increasingly sensitive to the rapid dissemination of fear that our
crowded social platforms allow us. But
while that certainly explains some of the volatility that must be accepted as
part of the new normal investing environment, I couldn’t help being distracted
by the financial services industry calling out the 10% decline in the market as
the best reason to buy and hold , an opinion I strongly disagree with.
That’s because most in the financial services industry
are in the business of selling a product whereas many are also doing what I do
which is to provide a service that can
be described as focusing more on the management of the products available. The
difference isn’t subtle either since while both sides agree that the benefits
of professional advice are crucial to meeting the expectations of the clients,
there has more recently been disillusionment, especially among younger
investors concerned that the bottom line is more important than the service.
Hence the introduction of Robo-Advisors, those websites that offer investment
advice based on an algorithmic model that crunches your personal information
with many years of investment product results to present an allocation that is,
or rather claims to be, personalized.
Besides the obvious comparison to the concept of buy and
hold, in that both strategies utilize what is referred to as Passive
Management*, one could easy visualize the more dynamic use of digital
investing, and that’s where I come in. As many of you know I use the breadth of
technology that is offed by TD Ameritrade, the firm that is custodian of your
assets. The liquidity that comes when I allocate, buy, sell and rebalance
accounts with common characteristics is arrived at in as short as 15 minutes is
invaluable when managing risk in today’s volatile markets.
There is no best method when investing actively or
passively since people who recognize the value of investing for the long term
can see value in one or the other. And there are numerous other factors at play
that revolve around risk and liquidity as today’s clients want access as much
as they want results. Each method ensures that there is room for professionals
and robots especially when today’s modern technology can deliver the experience
of investing more efficiently and sometimes cheap enough so that most people
can have both.
