Investors are still relying on the conventional investment strategies of buy and hold (asset allocation) and active management (professionally managed or DIY) to navigate the new global equities market. The unfortunate reality is that both strategies fall short, and investors are ultimately going to pay the price.
Buy and hold assumes that the investor and investment professional are emotionally strong enough to ride out market volatility throughout a full bull and bear market cycle. DALBAR, Inc., the financial community’s leading independent expert for evaluating, auditing and rating customer performance, once again proved in its 2016 Quantitative Analysis of Investor Behavior (QAIB), that buy and hold doesn’t work for average investors, as they are “loss averse” and simply don’t have the emotional strength to withstand market volatility [DALBAR]. As a result, investors are selling low, buying high, and ultimately failing their investment plans.
These multi-faceted challenges have created an investment environment of uncertainty, diminishing returns, and the willingness to chase returns while assuming significantly greater risk. Investors need to be reminded that assuming more risk does not always equate to higher returns and in fact, could result in financial hardship.
In response to the quest for sustainable solutions, an innovative, viable strategy has emerged: Artificial Intelligence Investment Strategy (AIIS). It is designed to help navigate the complexities of the new global equities market by providing the investor with overall risk management perspective beyond their portfolio makeup.