Technology

Machine learning can be used in investing in a variety of ways. This article seeks to show a few of those and describe the basics. Hedge funds have tried for years to use machine learning (or AI) in their funds. Moving on to today, all quantitative funds use some form of machine learning. Some hedge funds even build around machine learning specifically, spurning human intervention. Risk Management Risk...

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In Forbes I found a post about some 'expert' model portfolios. I thought it would be interesting to try optimizing these portfolios using RIAengine smart portfolio optimizer, and seeing what backtests looked like. Here are the results. Buffet 90/10 Portfolio The first portfolio is simple, just 90% allocation to an S&P500 index fund (I chose SPY) and a 10% allocation to Bonds, I used SHY. Here is...

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High quality data is important for a company building investment apps. That's why we're excited to announce that we will soon have a deal with Morningstar, one of the leaders in stock market data. RIAengine uses data to analyze investment portfolios. We use this analysis to help you come up with better portfolios. RIAengine will be launching the smart portfolio optimizer soon to a small beta...

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Investment portfolio risk can be an uncomfortable topic. It’s easy to find articles all over the internet that encourage people to sit tight when things are dropping. Warren Buffet’s famous instructions regarding his wife’s trust are to put 90% of it in the S&P500. And since Warren Buffet says to do it, a lot of people think we should all do the same. (side note, with...

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Prominent asset manager Mary Meeker once said her primary goal is limiting drawdowns! While most portfolio construction is explicitly or implicitly focused on returns, she knew that minimizing events that can decimate the portfolio is more important for long term gains than trying to maximize growth periods. Famously, a portfolio needs to double to make up for a 50% drawdown. So how to minimize drawdowns? Portfolio diversification...

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The first time I heard the term ‘Artificial Intelligence’ was in the 1980s, when my dad worked for Digital Equipment Corporation, in the Silicon Valley of the East (Massachusetts). And yes they made computer chips from Silicon. In the 80’s Artificial Intelligence referred to, basically, complex logical structures, with each decision leading to a tree of subsequent possibilities. It’s all compute power allowed in the...

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Recently I saw an article about Monte Carlo Analysis, which (as you know) is a way to evaluate a person’s ability to meet their future income needs. Using a portfolio of securities or asset allocations it runs through as many rolling periods as available in the data, to come up with a probability of meeting future income needs. Certainly Monte Carlo Analysis is not great with...

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You may have heard of Markowitz’s Critical Line Algorithm, or CLA. CLA was Markowitz’s attempt to solve the problem of portfolio optimization using quadratic math. For a couple reasons is was an ingenious invention. But it also has its problems. The problem with CLA is that it demonstrates large changes in the portfolio with small changes in the forecasted returns of assets. This is a big problem...

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I know, "data flow" sounds a little pretentious, and what the heck does it mean? The core of your business works between several key applications: a financial planning application, a portfolio management system, of course a CRM, and maybe one or two others.  So what happens is client data needs to go from one thing to the next. For most advisors, this leads to multiple efforts to...

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