Posted by supersaiyan3 > 2020-04-26 23:45 | Report Abuse

Why people likes to speculate (while the total expected return of owning a well balanced portfolio long term definitely outperform speculative fairy tales that often burst eventually)? It is because, for ordinary working class, the expected returns must be good enough to make their time worthwhile.

Say Jack's salary is RM5000 a month, RM10,000 is invested. Jack would expect 2-3k or more profit a month to make his time worthwhile. Invest in a well balanced portfolio, say earning a decent 15% p.a., that's make Jack's profit RM125 per month. Just not attractive enough for Jack.

(However, that RM125 per month is going to last very very long time. )

As Warren Buffett said, people doesn't like get rich slow.

Posted by Nonare > 2020-05-28 15:19 | Report Abuse

I wonder if a stronger statement AGAINST roboadvisors is warranted.

Firstly, roboadvisors offer no real added diversification. You can buy a single S&P 500 ETF and you are properly diversified. You don't need more than 500 stocks. If you wish you can also buy ETFs with 2000 stocks. Why pay a robo advisors to buy or rotate a bunch of ETFs?

Secondly, 1% mgmt fee is high relative to just buying S&P 500 ETF at 0.03% mgmt fee. That is 33x more. Compounded over 10 years, a 1% fee will cost you at least 10% of your asset. It is only worth paying if you can convince yourself that the roboadvisors can enhance your return above and beyond the 1% they charge you which leads me to the next point.

Thirdly, it is unclear and highly doubtful that the roboadvisors have the "algorithm" or the "formula" to beat just holding the S&P500. I have not seen a single robo advisor explain their algorithm properly and explain why it will justify their 1% fee. By the way, having an algo that will beat the S&P is a very big deal. To have an algo that beat S&P by 1% (that's the robo raison d'etre) is a big statement. The pension funds around the world will clamor for your algo.

All the robo has shown are fancy UI and basic financial planning. No real theory and definitely no real track record to back it up (which they should be happy to show and tell if they have an algo because it can be thoroughly backtested). And if they don't have an algo, then behind the digital facade is just humans doing dubious asset allocation and market timing. Where is the robo then?

Ben Graham said

“An investment operation is one which, on thorough analysis, promises safety of principal and a satisfactory return. Operations not meeting these requirements are speculative.”

Do the robos meet this requirement? Have they explained why by investing with them, you can do better than just holding S&P? Can you yourself, as an investor, explain why?

If I'm giving money to Buffett, I can say "he looks at company as a whole ownership of a biz not individual stock ticker. He believes each biz has an intrinsic value, some easy to calculate, some hard. He will buy those whose asking price is lower than the intrinsic value by a margin of safety just in case he make a mistake"

Can you say the same of the robo? Can you be sure their algo won't lose you money? Can you even explain their investment strategy? If their funds are down 40%, would you top up? If not, it's just a investment scam/speculation behind a digital facade