Around the World in 100 Words, November, 2019: Week 45
With stock markets continuing to move up nicely, now is a particularly good opportunity to look at capital markets and how they have evolved over time. Not surprisingly, the trend towards the automation of markets continues, but what is surprising is the speed with which this is happening. The article from the latest Economist magazine I have included here, identifies the continuing trend to the computerization of the industry. For the first time in history more money is being managed by algorithms than by humans.
Artificial intelligence combined with super-powerful computers are gaining autonomy and are now devising their own strategies without needing human guidance. Concern over financial stability is understandable, yet two benefits from this are that the cost of trading has fallen and markets now have greater liquidity.
The question is not however, whether human investors are still the smartest guys in the room, but how do we incorporate this reality into our asset models for your benefit? The answer to this is to partner with leading wealth management companies including Dimensional Funds, whose approach to stock and bond selection is -and has been-utilizing this empirical, algorithmic style of investing to deliver a better investment outcome. In simple terms, we are harnessing the rise of computer-driven investing for your benefit. This allows us to spend more time with you defining financial goals and objectives, understanding your investment psychology, managing emotions and helping you with what comes next in life. Simply put, the human component of investing, and the one that thankfully never changes.