To The Moon

Well I have been embarking on multiple experiments and it's been about 6 months with some insights to share. Of course what I share is solely based on my experience and does not constitute a recommendation or that you follow me in my footsteps.

So what is the experiment?

Well simply it's this. Active investment vs DCA vs Robo investing. A three way fight!

The case for active investment

Well like this fictitious image suggests, active investment involves human involvement in the buying and selling of individual stocks or ETFs. 

The positives are that if you have a particularinvesting methodology, it might bring you good results and occasionally grow that is far beyond the measly bank interest rates. Yes I am talking about that 0.05%. Aside, you get to be more confident about yourself and your wealth management should it grow in time. Finally, you gain real world experience in being in the trenches as opposed to looking at another personand wondering if you would make it via stock investing.

On the flip side, active investing means you need to be active. Work needs to be done and you cannot blindly let go of your investments. There's that nagging feeling sometimes, like when you are wondering if you are wrong and a real risk of losing it big, or even losing it all.

Robo-investing 

Robo investing is a form of passive investing that takes out the inconvenience of active investing. Pass some tests and all you have to do is invest in the funds that have been allocated to you, in a fixed time structure.

The positives are that it is emotionless since the methodology by the Robo is already been defined. It is also hassle free. No need to think how much you need to allocate into your portfolio since you decided on that much earlier. Aside, the risk of crashing to zero is super unlikely since it has already allocated funds based on your risk profile, into multiple broad baskets of stocks, indexes, funds, bonds, etc.

Now the downside of Robo, is that as a human, you can intervene midway. You can say, "hey, this investment is crap and I want to changethe methodology to a lower risk or higher risk portfolio." This is the emotional risk. Aside, while downside protection is strong, upside growth is also restricted. A knife cuts both ways. Finally, you are giving up control of your finances to a methodology that you have little controlor understanding over.

DCA is like this good luck cat. It is not a robotbut it moves it's hand in a regular rhythm. What I did was also to test by DCAing into a broad based index fund on a regular monthly basis. Market down, money goes in. Market up, money also goes in. You get it.

DCA is just as emotionless but slightly more of a hassle as the buy order needs to be placed. Studies have shown that just by doing DCA into a broad based index like $S&P 500(.SPX)$or $Invesco QQQ Trust(QQQ)$you would be able to beat a majority of investors. DCA is also free of the risk of going into bankruptcy or zero value unlike active stock investing.

The downside of DCA is that you need to choose the right index and also be financially disciplined to follow the regular methodology. Aside, making huge sums of money with DCA requires a huge level of patience of sitting on yourbutt and doing nothing. Finally, DCA is sort of like the usual boring standard. Nothing to bragabout if you do well.

So how?

Well I observed that during the down cycle of May-Jun, Robo had the least drop, followed by DCA, with active investing getting the biggest dip. (Yes you need a strong heart). Everyone was red. Now, DCA index is the strongest green, followed by active investing (green) and with my Robo in red. 

Based on my 6 month experiment, DCA provides the best upside with moderate downside risk. However if youare going for minimal downside risk, Robo seems to be the best. For maximal potential gain, active investing might just be the one. However I have yet to prove it.

What is your experience? Hope to learn from you.

@TigerStars@CaptainTiger@MillionaireTiger