# Robo investing or program investing



## Rusty O'Toole (Feb 1, 2012)

Does anyone invest using investing software or programs? It seems the latest algos are better than humans. Is there any way to learn about this as a lay person?


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## tygrus (Mar 13, 2012)

Rusty O'Toole said:


> Does anyone invest using investing software or programs? It seems the latest algos are better than humans. Is there any way to learn about this as a lay person?


Dont trust man or machine with my investments. Only me.


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## Rusty O'Toole (Feb 1, 2012)

What if it could be proven a robot could invest better than you can? They already have programs that are better than doctors at diagnosing diseases and cars that drive themselves.


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## Beaver101 (Nov 14, 2011)

^ So when are these inventors rolling out the self-flying turbo jet to take me to Vegas?


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## Rusty O'Toole (Feb 1, 2012)

Call any Las Vegas casino and tell them you have a sure fire way to beat the tables and a $100,000 bank roll. They will fly you in first class .

Airplanes already fly themselves. The pilots are only there for takeoffs and landings and not really necessary for that (as long as nothing goes wrong).


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## Rusty O'Toole (Feb 1, 2012)

The more I study investments the more I am convinced that mathematics beats intuition and human judgement. So logically a computer program should be a better investor than any person. There is a lot of empirical evidence to back this up. I wonder if anyone has worked with Tradestation or other computer programs along these lines?


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## james4beach (Nov 15, 2012)

Well sure, there are many hedge funds and "quants" that follow entirely mathematical techniques. These kinds of hedge funds have been around for a long time. Some have done very well, others have disintegrated. Here is one of the successful ones:
http://www.businessinsider.com/jim-simons-interview-ted-2016-5


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## CanuckBull (Jan 24, 2017)

I'm more interested in a software which could calculate my asset allocation so I would now how exposed I am in different segments. Some like Morningstar.ca have an X-Ray function with the premium member ship which does the job, but no import function and manually typing all investments is so painful. I tried the service and gave up and got my refund.

Quick Books also does similar but I had trouble importing data from Questrade and so I gave up on that too. Still looking for a reliable tool ...


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## lonewolf :) (Sep 13, 2016)

Rusty O'Toole said:


> The more I study investments the more I am convinced that mathematics beats intuition and human judgement. So logically a computer program should be a better investor than any person. There is a lot of empirical evidence to back this up. I wonder if anyone has worked with Tradestation or other computer programs along these lines?


 Don Wallenchuck (sp?) AKA da chief when of the best traders with one of the best track records never used a computer well everyone else was. Don't know if he uses computer now.He has a giant chart of the DJI on his wall that he charts tick by tick.

Martin Armstrong perhaps one of the best programmers ever for developing a computer to trade. Armstrong went to museums to get data for back testing.


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## mordko (Jan 23, 2016)

CanuckBull said:


> I'm more interested in a software which could calculate my asset allocation so I would now how exposed I am in different segments. Some like Morningstar.ca have an X-Ray function with the premium member ship which does the job, but no import function and manually typing all investments is so painful. I tried the service and gave up and got my refund.
> 
> Quick Books also does similar but I had trouble importing data from Questrade and so I gave up on that too. Still looking for a reliable tool ...


My spreadsheet does X-ray by country and industry type for the ETFs I hold. I have to import purchases but it's a reliable tool alright.


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## CanuckBull (Jan 24, 2017)

mordko said:


> My spreadsheet does X-ray by country and industry type for the ETFs I hold. I have to import purchases but it's a reliable tool alright.


MordKo, I have seen a bunch of spreadsheets with good capabilities but none really did a good X-ray type report. You mind if I ask if you made it yourself or is it something we can also download and use?


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## OptsyEagle (Nov 29, 2009)

Rusty O'Toole said:


> Does anyone invest using investing software or programs? It seems the latest algos are better than humans. Is there any way to learn about this as a lay person?


Anything you can buy will not work. The problem is quite simple. The biggest problem a "sure thing" system will have is the rest of the market finding out about it. It will self defeat the program. Let's face it. If everyone knew that you should buy a certain stock, who would ever sell it to you. Now you might say, that everyone will not start using the same system, but what happens if just a lot of people start using it. If the program said you should buy a stock that trades at $50 and many people simultaneously attempted to buy it, you would probably find your best offer to be $55 or $60, pretty darn quick. You can see how a system that gets popular will start to defeat itself.

Now, lets take a look at the individual that is selling this system to you. If it worked so well, why would they want to ruin it by selling it to others. Even if they were that dumb, you can see how it would ruin itself if they did.

So my point is. Even if there is a system out there that has exceptional value, it will not be available to the average person and probably not available to anyone. This is just common sense.

If you think it is possible to have a system that will work, it will require you to invent it yourself. If you do succeed, I doubt you will be dumb enough to come and tell us, but either way it will have the same effect for us whether you do or you don't.


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## CanuckBull (Jan 24, 2017)

I don't expect to find a reliable software to choose stocks for me, but I do like to be able to calculate my asset allocation and returns automatically. I have different Canadian and US investments and in different brokerages and any program I have tried, did not work out very well. Google Finance, Monringstar.ca, Quicken, Personal Capital, Mint....they all lack proper import function or don't support certain institutions or country. Even thought of separating US and Canada but still I need to input the data manually which is painful. 
I think I have to stat developing my own excel spread sheet or find a good one and improve it to my needs. Any suggestions on a good template?


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## hboy54 (Sep 16, 2016)

Rusty O'Toole said:


> The more I study investments the more I am convinced that mathematics beats intuition and human judgement. So logically a computer program should be a better investor than any person. There is a lot of empirical evidence to back this up. I wonder if anyone has worked with Tradestation or other computer programs along these lines?


The more I study investments, the more convinced I am that mathematics brings next to nothing to the investing process and one is better off paying attention to human intuition and judgement, both your own, but most importantly that of those outside of you. 

I say this as someone with an engineering degree, that is numbers are in my nature. I think in numbers more than I think in language.

I think whoever's observation it was that "investing is primarily a task of psychology not mathematics" was spot on.

hboy54


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## jargey3000 (Jan 25, 2011)

I had one these machines years ago (I called him "Hymie")
Gave advice like:
"MUST...
BUY...
NORTEL...."

"MUST...
BUY...
BLACKBERRY.."

etc.

Didn't work out


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## Kropew (Nov 24, 2013)

I'd be very surprised if there was an actual quality program, that could act on behalf of a human investor, available to the individual investor.
Other than that, I believe that investing is more of an art than a science. There are multiple factors that even a powerful program is not yet able to calculate properly ; madness of the crowds, durable economic moat, value of the companies management and many more...


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## MrsPartridge (May 15, 2016)

Those robo advisors like Wealthsimple aren't a good choice for me, but they'd be good for people who want a more hands-off approach. The program makes you allocate your money in a certain breakdown. So if you've got, say 20 years to retirement, it'll put perhaps 30% in fixed income, 40% in equity. (Not sure of their breakdown, just making up an example).

I'd like to decide how much fixed income I'll have as I know when and if I'll need that money. Plus with etfs, index funds etc. I'll be put into some equities that I don't want. I avoid airlines, retail (the Bay etc.).


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## lifeliver (Aug 30, 2010)

You would need to learn how to code and then back test your systems to see if they provide viable win loss ratio and risk reward parameters. Then you would have to forward test it to see if you can replicate the back test results. I don't think you can buy a ready made one that would actually be profitable. Why would anyone sell that if it can actually take money out of the markets?


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## bgc_fan (Apr 5, 2009)

There was a Dragon's Den episode with a 14 year old Julian Marchese (at the time) who had developed a program that apparently did this. He has now started up his own hedge fund based on this.


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## amitdi (May 31, 2012)

lifeliver said:


> You would need to learn how to code and then back test your systems to see if they provide viable win loss ratio and risk reward parameters. Then you would have to forward test it to see if you can replicate the back test results. I don't think you can buy a ready made one that would actually be profitable. Why would anyone sell that if it can actually take money out of the markets?


there have been several books and papers written on profitable strategies and out of the sample testing. why do they do that? mainly academic research. why do you have to do all the hardwork if you can just re-use someone else's. try readin "What Works on Wall Steet"


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## amitdi (May 31, 2012)

I invest purely using mechanical algorithms. After doing years of research, I came to realize that discretionary analysis is a very difficult to do and very few people can do it. (Althought most of them think they are above average but thats a different story).

I do believe that there are time tested fundamental strategies that if followed with discipline can beat the market. I have selected some good ones and ranked them based on my own factors like - profitability, backtesting information, ease of use, drawdown risk, etc.

I have been using them for last 3-4 years and at this point I am totally comfortable and committed to using them through thick and thin. Luckily, I havent gone through a bear market. But when I do, I plan to stick to the strategies. My strategies are not market timing strategies, i.e I am fully into the market all the time. They are more of ETF/ stock selection strategies and periodic rebalancing.

The only place where I use discretion is when I add funds to the accounts. Ideally, even there I should not be using discretion. But yes, that is once aspect I need to change myself.


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## amitdi (May 31, 2012)

Using a system or discretion is a never ending argument and both sides will have numerous examples and studies to prove how one is better than the other. Those who are interested in this topic should seriously consider reading - Thinking, Fast & Slow by Daniel Kahneman.

Its one of the best non-fictions books I have read that talks about the psychology and science of making decisions. The author also has one chapter on this whole debate of system v/s intuition and how its used in business, sports, investments, etc.


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## CanuckBull (Jan 24, 2017)

amitdi said:


> Using a system or discretion is a never ending argument and both sides will have numerous examples and studies to prove how one is better than the other. Those who are interested in this topic should seriously consider reading - Thinking, Fast & Slow by Daniel Kahneman.


I actually needed a book to read and took your advice. Read a few free pages in amazon and it seemed somehting I can use....thanks for the advice! 

on the Software issue, I initially go the 2017 Quicken thefirst day it came out. my first time using it, so I got frustruated when I saw it wont import data easily and especially from Questrade, so I asked for a refund. Then I checked other software out there, and after pulling my hair (from whats left of it), I put my tail between my legs again ad went back to Quicken.....lol

I will only use the asset allocation. with a bit of manual entries and work, once its set-up, I think it will do the job. Is for Robo advisory, I would not care so much about it. If it existed, everyone would have been a millionaire by now....it all about patience, the right asset allocation, status, age, quality of investment, knowledge and to less extent taste. Thats my thought. 

What I learned after figuring out Quicken so far is that my asset allocation is "HORRIBLE". I am overly exposed to the US market, high fee mutual funds with low returns and no bonds. The next few weeks will see a lot of changes in my portfolio.....


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## lonewolf :) (Sep 13, 2016)

The thinking to try to rationalize the abnormal market to the new norm is the Robo investing has made the market safe ? Kinda reminds me of the portfolio insurance making the market safe in 1987. Its like a poker game not everyone can win the money on the table.


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## Nerd Investor (Nov 3, 2015)

I'm not at the point where I'm using algorithms or anything like that but I do try as much as possible (not always successfully) to invest following some kind of rules based methodology. I'm also looking to exploit factors (value/quality/momentum) that have a history of outperforming the market. I guess you could call it evidence based investing. For me, this means using screens to select my stocks/ETFs. The hardest part isn't following the rules, it's not constantly changing the rules .


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## Rusty O'Toole (Feb 1, 2012)

OptsyEagle said:


> Anything you can buy will not work. The problem is quite simple. The biggest problem a "sure thing" system will have is the rest of the market finding out about it. It will self defeat the program. Let's face it. If everyone knew that you should buy a certain stock, who would ever sell it to you. Now you might say, that everyone will not start using the same system, but what happens if just a lot of people start using it. If the program said you should buy a stock that trades at $50 and many people simultaneously attempted to buy it, you would probably find your best offer to be $55 or $60, pretty darn quick. You can see how a system that gets popular will start to defeat itself.
> 
> Now, lets take a look at the individual that is selling this system to you. If it worked so well, why would they want to ruin it by selling it to others. Even if they were that dumb, you can see how it would ruin itself if they did.
> 
> ...


I'm convinced you could have the best investing system in the world and publish it on the front page of the Wall Street Journal and 99 people out of 100 would just flip the page over. Of those who tried to implement the system 9 out of 10 would do it wrong, misunderstand it, get ideas of their own or otherwise mess up. Maybe one person out of a million would understand it, and practice it until they got good at it and make some money. In the meantime there would be a new fashionable fad come along every week and the old ones forgotten.

A good example is the famous Turtle Traders. They created a sensation in the investing world in the 80s and everyone wanted to know their secret. But they were sworn to secrecy and kept mum. In the end the secret leaked out, they were using a Donchian trend following system that was old as the hills and had been in the public domain for years. Since then I imagine a few people have tried it, if they were the kind of people who liked technical trend following systems in the first place but it hasn't set the investing world on its ear.


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## Rusty O'Toole (Feb 1, 2012)

I will also say, I have read the stories of many successful investors and traders and they all have one thing in common. They all have a set of rules they follow and they all say the more they stick to the rules the better they do, and when they go getting impulsive ideas they lose. Not one has ever said I just like to wing it and see what happens, or I do better when I go by instinct.


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## Nerd Investor (Nov 3, 2015)

Rusty O'Toole said:


> I will also say, I have read the stories of many successful investors and traders and they all have one thing in common. They all have a set of rules they follow and they all say the more they stick to the rules the better they do, and when they go getting impulsive ideas they lose. Not one has ever said I just like to wing it and see what happens, or I do better when I go by instinct.


Quantitative Value is a book I read a few years back that I think you would enjoy. It's about value investing but also very much about rules based / quantitative investing. Lots of research and anecdotes about check lists and rules outperforming humans.


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## amitdi (May 31, 2012)

Rusty O'Toole said:


> I'm convinced you could have the best investing system in the world and publish it on the front page of the Wall Street Journal and 99 people out of 100 would just flip the page over. Of those who tried to implement the system 9 out of 10 would do it wrong, misunderstand it, get ideas of their own or otherwise mess up. Maybe one person out of a million would understand it, and practice it until they got good at it and make some money. In the meantime there would be a new fashionable fad come along every week and the old ones forgotten.


you are right. when i started implementing the rules i read, i found that implementation was a whole new ball game altogether. there are lots of setups that one needs to do. and i am sure most of them get blown away and never quite end up following the rules for a long time. but that i think is a good thing for the ones that do. because if everyone did it, then markets would become efficient.


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## Rusty O'Toole (Feb 1, 2012)

A good analogy is driving a car. You can learn the rules of the road, write the test for your driving license, but you have to get behind the wheel and practice. It takes time to learn how fast to take corners, how close to follow other cars etc. Over time you develop a feel or instinct for driving and it becomes second nature. I think the same goes for investing, you need rules but you also get better with experience.


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## lonewolf :) (Sep 13, 2016)

Rusty O'Toole said:


> I will also say, I have read the stories of many successful investors and traders and they all have one thing in common. They all have a set of rules they follow and they all say the more they stick to the rules the better they do, and when they go getting impulsive ideas they lose. Not one has ever said I just like to wing it and see what happens, or I do better when I go by instinct.


 let me guess one of the Market wizards books by Jack S


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