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The rise of (near) free trading?

Raphael Fiorentino
20th August 2018 - 2 min read

RobinHood, Dabbl, Revolut:
the rise of (near) free trading... and uninformed investing?

Informed investors buy and sell on mispricing that is either relative (arbitrage) or absolute (fundamental investing). However, some investors trade without regard for price or value, creating opportunity for other market participants
Michael Mauboussin, Easy Games, January 2017

Overtrading and overconfidence are two of the main reasons why the average individual investor systematically underperforms the market, both before and after fees, regardless of whether the selection involves stocks or mutual funds. But all it takes is a little more sophistication to dramatically improve one’s return prospects, and it is something that clever technology can now make accessible to most individual investors in a time and cost-efficient manner. Online trading platforms who succeed in delivering such high value-added service directly to their users will enjoy the highest growth and retention rates.

As innovative broking platforms make it ever easier and cheaper to trade, the resulting increase of uninformed market participants (who use simplistic strategies ranging from “sentiment investing” to “tip-offs” to “reading” price charts) creates an “easy game” for informed ones (fundamental investors with an edge grounded in their multi-year view and understanding of “who’s on the other side of the trade”, among other things). Thanks to technology and a little personal involvement, most individual investors can and should aim to graduate, in industry jargon, from “dumb money” to “smart money”.

Anyone can now aspire (and afford) to have one’s own professional research and portfolio AI analyst, one that will distil the fundamental framework and insights to deal productively with the risks associated with any stock, portfolio or market holdings and answer the top 3 challenges faced by any active investor:

  • What stocks to pick that offer high upside potential for the downside risk taken
  • How to diversify a portfolio to try and avoid large synchronised losses
  • When to reduce exposure to a holding or to the market altogether

An unbiased, unopinionated AI analyst is designed to empower individual investors to be (part-time) managers of their own fund. With this approach, the machine crunches, distils, nudges and alerts, while the human can focus on freely making all the important calls. It is the best of both worlds, one where success is built with a machine (ie. Intelligence Augmentation), not by a machine (ie. Artificial Intelligence).

At butterwire, we have created the first such research and portfolio AI analyst, one that is end2end, intuitive, educational, high performance, time and cost-efficient, and equally suited to both the professional (for time-saving) and non-professional (for empowerment) investment community.

Go to www.butterwire.com and start your free trial now (no credit card required).