| Hey Taylor
- The stock market has been a rollercoaster lately, and I'm wondering
if I'm better served by a robo advisor during these wild times, or
a real live broker. Do people tend to help or hurt more than automated
systems during these times? - Chandler in Corrigan
Hey Chandler - That's a great question. When the market is
constantly rising and falling, you'll hear all sorts of ideas about
how you should weather the storm and make the most money, and a lot
of that advice will be bad. So, when the market is crazy, are you
better served by humans or robots?
Before you can decide who's better equipped to navigate a volatile
market, you have to look at where your money is. If you have a billion
different positions stacked in a mutual fund, no one can save you.
Your money can't work properly when the market is bouncing all over
the place and you have hundreds and hundreds of companies in your
portfolio. Meanwhile, moving your money around to correct these losses
will probably just land you with a bunch of service fees and continued
Generally, when the market makes large moves in either direction,
the wrong choice is to be too reactionary (unless you're lying in
wait for a good value purchase). People are more prone to poor reactions
than neutral programs, and that can work to your benefit. Of course,
having a level-headed financial advisor who doesn't panic at the natural
ebbs and flows of the market is just as good, if not better, than
an automated system.
Keep in mind, the stock market loves reacting to things people say
and do. Take the recent tariff talk for example, and the immediate
drop in stock prices. No tariffs had been levied, no new laws had
been signed, but investors reacted to the idea and the market turned.
Robo advisors can immediately analyze and utilize relevant data, and
that can give investors an advantage in some cases. At the same time,
no form of predictive analytics can determine what people are going
to say and how other market investors will react to those words. If
a program could do that, the Dow would be around 1,000,000 and Wall
Street would implode.
I don't believe that one type of advisor, live or automated, is better
during bullish or bearish cycles. I do believe, however, that certain
people benefit more out of human advisors and others benefit more
from an automated service. If you can figure out which you prefer,
you should stick with that option during the good times and the bad,
and I expect your money will grow in the long run. Good luck, Chandler!
© Taylor Kovar
March 30, 2018 column
More "Go Far With Kovar"
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