Why traditional investment methods like money managers, stock-picking, index funds and robo-advisors have proven to be ineffective in recent times, and why automated investing with Saay Finance is the right option for you.
Actively Managed Fund
Many believe that professional money managers with their stock-picking skills can offer better returns than a simple index fund. However, research indicates that the majority of actively managed funds have failed to beat the market. Take the example of Cathie Wood and her firm, Ark, which made high-profile bets on companies like Tesla, Zoom, Roku and Teladoc through her Ark’s flagship Innovation ETF has plunged 60% this year (2022), compared to “just” a 20% drop for the S&P 500. Plus, majority of investors invested into ARKK ETF was when it was at its all time highest. The FOMO led everyone to invest-in after which it subsequently dropped and lost over 75% of its value.
Stock-Picking
Stock-picking, as it turns out, is also not a winning game. Statistically, trading frequently and attempting to pick individual stocks often results in underperformance, as the stocks bought tend to underperform and those sold tend to outperform. Holding individual stocks for the long-term also carries significant risks and offers no protection as market declines.
See for yourself the max decline for some of the most popular stocks (Microsoft, Apple, NVIDIA, Google, Amazon, etc.) and the time it took to recover back to their original price.
Index Funds
Another way of investing is investing only in index funds like S&P 500 and Nasdaq 100. However, this also comes with its own set of challenges, as it offers limited potential for market gains during favorable market conditions (e.g. investing specifically in Energy sector if its outperforming S&P 500) and increased losses during economic downturns and market corrections.
Robo-Advisor
Robo-advisor follows a pre-determined, simple static allocation strategy of equity and bonds, and periodically rebalances to maintain the fixed allocation. But diversifying a portfolio through a mix of equity and bonds is no guarantee of investment success either. Recently, the rise in interest rates has hit diversified portfolios hard, leaving many investors disappointed with their bonds' performance. The traditional 60/40 asset allocation recommendation of 60% stocks and 40% bonds has also underperformed in 2022 due to inflation and monetary tightening.
Hedge Funds
While passive (e.g. robo-advisor) and active investment strategies (e.g. ARK ETF) may not have worked for investors this year, hedge funds like Renaissance Technologies, Bridgewater Associates, and Citadel have been able to outperform the market by use of quantitative finance, data crunching and complex statistical models. However, these funds rely only on high-risk strategies that may not be suitable for most investors. Furthermore, these funds are not accessible to most investors and only limited to high net-worth individuals or accredited investors.
So, What's The Alternative?
Saay Finance offers a unique solution that provides access to hedge fund data-driven algorithmic style of investing, tailored to your risk level. Our dynamic asset allocation strategy uses quantitative finance, mathematical models, and vast amounts of data to adjust a portfolio's asset allocation based on changing market conditions and macroeconomic events such as periods of high inflation, war, pandemic, recession or any other crisis. Our algorithms are heavily backtested as well as forward tested on over 100,000 future simulated scenarios, so you feel confident in investing regardless of where the market moves.
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