The Online Investing AI Blog

Automated Trading systems use computers to trade stocks and other assets. It may sound like science fiction, but computers are playing a more pivotal role in trading. Huge companies utilize computers to conduct complicated trades.

I know what you’re saying… how does that help you? All these big companies with deep pockets can invest in technology that you can’t afford.

But things are changing and advanced Automated Trading Technology will rapidly reach more investors and more self-directed investors.

There are a number of ways that Automated Trading is equal to–or better than–mutual funds as a tool for the self-directed investor. This performance should only improve over time.
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Index funds have become more and more popular over the last 15 years. The internet has made people aware of the high costs of mutual funds, and they were looking for a better solution. It’s true that index funds are probably better than mutual funds. But do they have drawbacks as well?

One of the major challenges with index funds is that they (obviously) go down with the market. People understand this when they invest, but they don’t really get it until they see their retirement account drop by 50%. What no one tells them is that sooner or later their account will drop by a large amount. It’s difficult to prepare ourselves psychologically for something like this, when we have no experience in the past.

Automated Trading systems do not need to go up and down with the market. They can exit or short a stock or index at any time. So, while the market goes down an Automated Trading system can actually make money. In fact, since markets go down faster than they go up, Automated Trading systems can make more money faster when the market is going down.

One of the good things about index funds is that once you make an investment, you don’t need to spend a lot of time or effort managing it. Index funds are perhaps one the most “Set it and forget it!” investments available. Automated Trading is similar in that it does not take a lot of work to manage the account. But you do need to check it periodically (if not daily) to make sure it is working properly.

Index funds definitely have their advantages. And, so do Automated Trading systems. It will be interesting to see how the investment landscape changes over the next few years.

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One of the major challenges with investing in stocks, mutual funds, and index funds is that we have absolutely no control over the asset. Our buying or selling does not move the price of the asset. And calling the CEO of a public company to give advice probably won’t work either.

It reminds me of a recent trip on a commercial jet. You’re sitting in the passenger cabin of a 747. Right at the moment that it takes off, the plane begins to shudder and shake. Do you know that moment? I get that feeling that I am powerless over what happens with the plane. At that moment, we have absolutely no control over our lives. We could live or die in an instant.

Many investment vehicles are just like sitting in the passenger seat of a 747. We have no control over what’s going on, and are at the mercy of other people. It’s a bit scary because sometimes those other people are not completely honest.

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