Why are Algorithmic Managed Investments Preferable?
As all financially-savvy people will be well aware, most big-name investors who hit the headlines are very few and far between.
The career of Warren Buffett, for example, perhaps the most successful and certainly the most famous investor ever, has been very unusual. His financial gains have, in many ways, been generated by a combination of extraordinary ambition, talent, and good fortune.
Readers who keep up with the latest financial news may have also heard of Bill Gross, Peter Lynch, or John Templeton. Like Buffett, these investors have demonstrated almost superhuman capabilities when it comes to reaping amazing returns over time.
Whilst the career stories of investors such as Buffet, Gross or Lynch may seem inspiring, it is important not to romanticise their success. The likelihood that you will make the kind of astounding returns these men have made on their investments is infinitesimally low. Do not be fooled into thinking that you are capable of scoring high returns by following your instincts or, indeed, those of investment managers who have historically helped clients make lots of money. The chances that you will be the next Buffett are, we are afraid to say, almost zero.
Fortunately, there are ways that you can still make a decent amount of money from the stock market. One of the best is known as an algorithmic managed investment.
So what is algorithmic investment and why does it work?
As the name suggests, algorithmic investment is a stock trading technique that takes advantage of complex mathematical formulas and models to make automated and high-speed financial transactions. The ultimate goal of this trading technique is to help investors bring in higher profits by using statistics to gauge which financial strategies are most likely to be effective.
The perks of this algorithm-based strategy were indirectly demonstrated in 2010 when two men named Eugene Pama and Kenneth French published a scientific article about how difficult it is to make significant returns using human decision-making skills alone. The pair tested 819 mutual fund returns between January 1984 and September 2006. Over 22 years, 97% of these managers were not expected to show net returns. It was concluded that the 3% of investors who managed to generate excess returns were simply very lucky.
To be in with a chance of making money, then, investors should put their faith in the power of technology. The fact that algorithmic trading automates what is typically a very speculative process means that trades can be made at the times when buying or selling conditions are optimal. Orders are placed straight away, meaning that investors can rest safe in the knowledge that they do not miss out on any important opportunities.
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You must log in to post a comment.Posted by: Robin on January 24, 2020
Tags: algorithm-based strategy, Algorithmic-Trading, Forex Managed Account service, investment programme