“Should I invest in Robo-advisor S?”
Nowadays technology is increasingly becoming the pill that cures all ills, solves all problem, increases IQ by 10 points and created world peace. So when someone asks me about Robo-Advisors, I know they are asking whether THIS IS IT, this is the answer they’re looking for, the missile they can Fire & Forget, the money they can stash and come back years later to be pleasantly surprised that they are now a millionaire… or they should move on.
Well, investment has become like this, dogmas.
For properties, it is “house prices never come down.”
For stocks, it is “what comes down, must go up.”
For Robo-advisors, we can add “cheap low cost Passive Investment always beat active fund managers.”
These came about because there was a study conducted in US about passive investments outperforming fund managers after fees. This happened because in the US, markets are very efficient. When a company make an announcement, millions of traders will trade immediately and the company stock price will adjust immediately to reflect the announcement. There is no room for the fund manager to capitalize on stock mispricings. However in developing markets, the stock price movements are usually BEFORE the announcement. So the fund managers would get in before passive investment Funds respond.
I’ve seen post by regular investors as well questioning the asset allocation models of the Robo-Advisors. Somehow even when we buy into the promise of technology, when confronted with a black box, we would still be really unsure of what we are really putting our hard earned money in.
To be sure, compared to scams and other high risk speculation out there, Robo-advisors are safer. But those who wish for an investment to end all investments must realize there comes a day when belief is no substitute for knowledge. The certainty and conviction of an investment may kick them so hard just because sometimes crisis affects all investments across all spectrum. Which is why till this day, every person’s idea of a successful investment is totally different from one another. Property, Stock, Unit Trust investors rarely cross boundaries or agree with each other. What works is sorely based on individual experience. Which is a pretty limited way to handle investments when the whole spectrum is available to all.