How high are assets valued today?
Total market cap (measured by Wilshire 5000 Total Market Index or Global market cap) in relation to GDP is broadly accepted measure of under or over valuation of stock market, as both measures are somehow in a fundamental relation to each other.
In "SAMT AG" proprietary system, the "Wilshire to GDP" ratio shows a stock market, over valuation of 25%, the highest over valuation reading ever. At the bottom of real estate bubble crash in March 2009, the ratio showed an under valuation of 30%.
Note that, this indicator is not a good source to trade, as an overvaluation or undervaluation does not mean the market has to be better in the near future. The under or over valuation can go on for many years.
But this ratio can tell, if you buy at a high or a low price compared to history. Keeping cash to invest only in a market under valuation will not work as a concept, as it is impossible to say when the next under valuation will happen and it offers a poor performance, based on scientific analysis. In fact, we know that if we invest now we will get a bad price, but we have to invest anyhow because we are not able to say when market will be better again.
Outcome: Market price can be measured and it can be understood that if the price is high or low, but it does not help for trading, as it does not indicate when the price will change or the market will correct itself again.
Is it safe to invest with robo advisory firm?
Robo Advisor 2.0 is a concept, which goes beyond an ETF investment concept. It is based on the "direct to customer", or "online sales distribution innovation" from the 1.0 concept, but in addition, it offers product innovation in alternative investment concepts, which are not correlated with the stock market.
It is a core-satellite concept, where stock or ETF investment is the core, and different non-stock market related investments are the satellite investments. The core is still based on a long-term buy and hold approach, but has additional approaches on "How to handle and act inexpensive or cheap markets?", measured by market capitalization in relation with GDP.
SAMT AG has developed a standardized portfolio-based approach in which we offer an ETF core investment and different alternative modules as satellite investments.
- The 1st enduring core module is constructed in a way, that it does not need to be changed for many years.
- The 2nd module offers an alternative investment in spreads between commodities.
- The 3rd module offers different investment advices, i.e., with a fundamental approach or futures swing trading. This all is controlled by a risk management module, and the money is split between the different modules.
In addition, ETFs or stocks can be sidestepped with options, all the time, or in phases of higher volatility. This allows it to be fully invested, but not only in stocks. The shift between the modules is changed, and more of the money is invested in stocks when they are at less price.
Final investment conclusion:
Bubbles and mis-investing in Stocks, Bonds and Real Estates are everywhere, but this does not mean that something is burst. A correction still can take years, but if markets correct it will take years or decades to reach the old level again. Investors are forced to invest somewhere, as idle cash is not an option, as it will deliver lower performance.
Robo Advisor 2.0 offers investment solution which diversifies it, in additional dimensions such as alternative investments like managed futures, commodity spreads and offers fundamental investment or other diversified investments for a fair price.
What is Tax Loss Harvesting?
Tax Loss Harvesting is a practice of selling a stock, mutual fund, exchange-traded fund or marketable securities at a lower price, than which it was bought at. This strategy is usually followed to reduce taxes. Even though it cannot bring back the investor to the previous position, however, it can significantly lower the loss.
Which robo advisor suits me?
A robo advisor is suitable for you or not, depends on the way they are set-up and your personal circumstances, whether you have fixed income or want to invest a large capital at once etc. It is advisable to select the suitable one, after properly analyzing the minimum investment required, type of technology used to manage the portfolio, and the management fee. Some robo advisors will typically have higher fees as compared to some active managers and minimum sum in investment account, and are tailored more towards high-level investors.
Is robo advisor better than human advisor?
Robo advice is usually low cost, unemotional, transparent, risk-focused and can also offer customized approach since it's based on algorithms. However, a financial adviser can help you with financial planning, if you have a higher 6 to 7 digits of income to invest, then financial advice will be of much help. At the end of the day, a robo-advisor will provide services to the selected group of investors, and financial planner will provide services to different group of investors.