Why is your lazy cash still sitting on your couch? Why is it eating your food and watching your TV for free while inflation runs hotter than ever? And it feels much higher than any government stats you’re hearing. Your Survival Guy wonders, isn’t it time you kicked your lazy cash to the curb and made it do something with its life? Of course it is. But what to do? Times, they’re a changin’.
There was a time, as my father-in-law, Dick Young, reminds me in an early morning email, when investors could invest in low-cost index funds and call it a day. Not anymore, especially with “Robo-Advisors” littering the landscape and index funds dominated by rank speculation.
“This was never Mr. Index funds, John Bogle’s intention,” Dick writes. “Not in a million years. Bogle would never have championed speculation. I knew Mr. Index funds way back at his days with Wellington Management, pre-starting Vanguard. John Bogle did a lot for the family and small business investor, and that did not include the likes of pie in the sky speculation.”
In my conversation yesterday with a prospective client, she told me she had a terrible experience with a robo-adviser. She said she felt like a data point for an algorithm. “I felt my concerns weren’t being heard,” she said. “I was just a number.”
Below is what I wrote to you months ago in the midst of the COVID-19 debacle about my concerns with the robots that I want you to read carefully. But only if you’re serious.
With casinos slowly reopening (sorry, most buffets are still closed), it looks like gamblers found a home with Nasdaq.
While the world, as we know, has basically come to an end, the tech-laden Nasdaq is up a couple percent year-to-date. Welcome to Planet Hollywood.
One is reminded of the dot.com bust especially when Shopify, a Canadian tech company, trades at a larger market cap than Royal Bank of Canada. Pop quiz: One was founded in 2004, the other in the 1800s.
Recently, I was asked about robo-advisors: You set-up an account with a low minimum, answer a questionnaire, and an algorithm invests you in a basket of mutual funds, ETFs, and/or stocks.
The robos save money on phone reps, have a big marketing spend, and a neat looking website.
But what if there’s a problem? A couple of years ago, when stocks were down 1,600 points, Bloomberg reported that the websites of robe-advisers Wealthfront Inc. and Betterment crashed. This is one of the MANY reasons robo-advisors will NEVER work for investors–NEVER. What a SHAM.
Also, it’s been my experience that investors want regular conversations about their life savings, especially when they’ve made money over a lifetime and it would take another one to replace the losses.
Losing $500 on a company like Shopify might be a cheap education to help a young saver seek out a diversified portfolio with the help of a robot.
Investing your life savings for and during retirement might require a more personal touch, especially when you have a lot more to lose than money.
Action Line: If you need help building a portfolio that avoids the rank speculation of robo-advisors, I would love to talk with you. If you would like to get to know me before we talk on the phone, there’s no better way than signing up for my free monthly Survive & Thrive letter. In the letter each month, I encourage and push you to achieve the personal and financial security goals you’ve set for your family. Click here to subscribe. We’ll get to know each other, and get serious about your future success.
P.S. And that’s why Your Survival Guy’s sticking with the four-year-olds. You know Peter Thiel as one of the few people in Silicon Valley who backed presidential candidate Donald Trump in 2016. Thiel was also a co-founder of PayPal with some guy named Elon Musk. And he was an original backer of Facebook. The guy knows a thing or two about startups. Which is why I recently reread his book Zero to One: Notes on Startups, or How to Build the Future.
You and I know that technologists tend to think about the future in terms of technology, much like a farmer thinks about the future in terms of farming. It’s what they do. Which is why, as an investor, I found this passage interesting and worthy your attention. Here it is:
To understand the scale of this variance, consider another of Google’s computer-for-human substitution projects. In 2012, one of their supercomputers made headlines when, after scanning 10 million thumbnails of YouTube videos, it learned to identify a cat with 75% accuracy. That seems impressive—until you remember that an average four-year-old can do it flawlessly. When a cheap laptop beats the smartest mathematicians at some tasks but even a supercomputer with 16,000 CPUs can’t beat a child at others, you can tell that humans and computers are not just more or less powerful than each other—they’re categorically different.
