AI is all the rage, especially in the investing world. Robo Advisors are advanced systems that use algorithms to predict investment strategies. The only problem? It doesn't work. The technology isn't there yet, and there’s a good chance it will never be there. The ETF AIEQ, which is run completely by AI, sees consistently meager returns. [1]
As of writing this article, the fund has a 1-year change of 3.49%. SPY, which is just an S&P 500 fund, has a 1 year change of 13.06%. It is clear from these statistics which the more optimal fund to invest in.[2]
Have you ever seen the Youtube video of two AI robots talking to each other? It's mostly nonsense until they talk about destroying humanity. At the rate it’s going, the Terminator may as well be a documentary. Until that day, using AI for investing is an ill-improvised strategy. Robo or algorithm investing is simply a new fad in which people should not give their blind trust.
Research shows that monkeys are better at picking stocks than fund managers – no, really.[3] The main difference between monkeys and fund managers? Monkeys aren’t biased.[4] Similar research shows that picking stocks has an only slightly better outcome than playing the lottery.[5] When we throw Robo Advisors into the mix, we find ourselves with another gimmick that is sure to cause us financial losses. [6]
Google, Microsoft, Facebook and IBM, the ones who design these types of algorithms, cannot even understand how they fundamentally work. Despite a team of incredibly bright, highly trained individuals, they still cannot reason why AI makes the decisions that it does.[7]
If the people who created the algorithms don't understand them, why would you trust them?[8] Would you take medicine that doctors don’t understand the mechanism of action in?
We both want to make money. Let us first refer to the study mentioned above. It concluded that the best-performing 4% of listed stocks accounted for the entire lifetime dollar wealth creation of the U.S. stock market since 1926.
Only 42.1% of all the stock returns (both monthly and for as long as a stock was listed) were even positive; by definition, the one-month T-Bill rate was always positive. Less than half (specifically 47.7%) of one-month stock returns were greater than the T-Bill returns for the same month. The reason that overall long-term positive stock returns seem so high is statistical; a stock such as Apple, Google, or Microsoft can appreciate by many thousands of percentage points, while a loser like Enron or Washington Mutual can lose only 100%.
Laymen terms? While the stock market created about $32 trillion in lifetime wealth over approximately 90 years, more than half of that came from only the 86 top-performing stocks, out of nearly 26,000. In reality, trying to beat the indices is a losing battle. Fund mangers, day traders, and AI fail at this time and time again, in a predictable pattern.[9][10][11][12][13]
The old, perhaps not sexy, but tried-and-true method of just buying companies that comprise of the indexes is the best way to grow wealth over time. Don't just take my word for it; let's defer to what Warren Buffet had to say about index funds. “I think [index funds] are the thing that makes the most sense practically all of the time.”[14] As we should all be acutely aware, Buffet is quite the seasoned expert in matters of investment. Here at the Welch Tribune, we followed the Sage's advice and created a motif that does just that. We do all the work; we create the strategies, and you get to benefit. All you need to do is hit the invest button below.
Minimum investment is subject to change and you have complete control over your account and money. If we ever update our Motifs, you will get a message. Don’t hesitate – start making your money now!
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It's highly recommended that you read the disclosure statements when you set up an account before you make a decision to invest. We all heard it before, past performance doesn't guarantee future results. Investing can be risky. You know the drill by now.
https://www.marketwatch.com/story/a-new-etf-uses-ibms-ai-technology-to-help-it-pick-winning-stocks-2017-10-18
https://www.investing.com/
https://www.businessinsider.com.au/monkeys-are-better-stock-pickers-than-fund-managers-experiment-2013-4
https://www.cnbc.com/2019/05/01/your-mutual-fund-may-have-a-political-bias-and-that-could-cost-you.html
https://www.marketwatch.com/story/why-picking-stocks-is-only-slightly-better-than-playing-the-lottery-2017-06-28
https://www.nytimes.com/2018/01/12/business/ai-investing-humans-dominating.html
https://qz.com/1146753/ai-is-now-so-complex-its-creators-cant-trust-why-it-makes-decisions/
https://www.marketwatch.com/story/ai-has-become-so-popular-in-picking-stocks-that-its-become-ineffective-2017-10-06
https://money.cnn.com/1999/08/09/markets/daytrade/
https://www.tradeciety.com/24-statistics-why-most-traders-lose-money/
https://www.thebalance.com/why-do-forex-traders-lose-money-1344936
https://www.zerohedge.com/crypto/day-trading-bitcoin-why-95-traders-lose-money-and-fail
https://www.aei.org/carpe-diem/more-evidence-that-its-very-hard-to-beat-the-market-over-time-95-of-financial-professionals-cant-do-it/
https://www.cnbc.com/2018/01/03/why-warren-buffett-says-index-funds-are-the-best-investment.html