Robo Advisors & Behavioral Finance

My latest at Alpha Baskets is titled Robo Advisors & Behavioral Finance and looks at the intersection between biases and quirks we all have and whether the so called robo advisors can help their clients from succumbing to their own fears and greeds.

The concept of robo advisors, portfolios built with low cost index funds based on how prospects/clients fill out online questionnaires, is valid but of course not for everyone and will of course have some drawbacks. Interestingly, ETF.com quoted Rick Adelman as saying they burn too much cash because their revenues are so low. Who can say whether Adelman is right or not but it is logical that as a new business model it will evolve/improve.

From the post;

Behavioral finance is always interesting because our emotions are regularly a bigger impediment to long term investing success than stock and/or fund selection. The article in question was an interview with Terrance Odean from Cal. Odean notes that “we can’t control our initial reactions, but we can learn to control what we do next.” He then goes on to discuss how to modify behavior.

Please click through to read the entire post.

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