Gyroscopic Investing

A friend of mine just told me about a new investment mechanism called Hedgeable. This is what they will do for you:

Why should you open an account with Hedgeable?

 We are the most sophisticated automated investing service on the planet

 Advanced portfolio customization in 200+ ways

 Highest risk management and downside protection

 Earn points for every dollar you invest. Redeem them for awesome experiences, events, and products!

 Access the most asset classes including gold, real estate, emerging markets, and commodities

 Invest in cool alternatives such as bitcoin, private equity, and impact causes

 7 day white glove service via chat, text, email, phone

Also, there is no minimum investment and no yearly fee. Here is the link:

www.hedgeable.com

Any thoughts?

They ask you 10 questions to help determine how they will invest for you. In my case, and taking into consideration the present investment climate and that it has determined that my risk tolerance is moderate, it is recommending for me:

71% AGG (bonds)
13% VTI
6% Vanguard Reit ETF
8% GLD and DBC (commodity index)
2% cash
No EM or international bonds
Kind of neat that it tailors the portfolio automatically for your time horizon and for present market conditions. They will even tax loss harvest automatically for you if applicable.

When I change my risk tolerance to low it will invest this way for me under current market conditions:

70% AGG
13% VTI
15% GLD
2% cash

Furthermore, it shows a target portfolio for me under, I guess optimal conditions, of:  50% VTI
15% International Equities
10% EM
10% AGG
15% Commodities

Edited
Interesting that they give you lessmore gold than stocks,
for the low-risk option. Perhaps something in the ten questions?

The questions are rather routine. Anyone can just click on Open acct and it will ask you those questions and provide you with their tailored portfolio. What they're recommending today makes some sense however their target portfolio looks pretty risky for a retired guy like me.

dualstow wrote: Interesting that they give you less gold than stocks,
for the low-risk option. Perhaps something in the ten questions?

Actually,  it's giving me 15% gold and 13% stocks for my low risk portfolio under present market conditions.

Whoops, I meant to say less stocks than gold. I will edit above.

Reub wrote: The questions are rather routine. Anyone can just click on Open acct and it will ask you those questions and provide you with their tailored portfolio. What they're recommending today makes some sense however their target portfolio looks pretty risky for a retired guy like me.

while a 50% equity mix may be volatile if you want to go by  the worst case scenario's to date it has been one of the least riskiest allocations  since it has had zero failures  at 4% to date and more than 90% of the time left you with  more than you started retirement with  left over .

that leaves a lot of slack in the plan  since the  allocations and investments are different as well as conditions going forward are quite different . .  most allocations for retirees or target date funds will be in the 40-60% range.  over and over being to conservative has sent far more failed retirements to the retirement graveyard prematurely then any 40-60% mix ever has  unless you only need  low  withdrawal rates  , but your own comfort has to be the guide .

i am pretty comfortable at 40-50%  in retirement  , especially since i keep 2 years withdrawals in cash . or about 8% of the portfolio .  but that gets spent down  over the course of the year  and refilled down the road  from dividends and interest  so it isn't a constant 8%  . it can range from 4% to 8% or so  depending on the time of the year and the bills paid .  most distributions happen in december for refilling .

now are you saying that depending on conditions they will allocate you anywhere between 13% to 50% equity's ? 

that timing would scare me .  that reminds me of the old market timing newsletters like fabian and the pack , who are gone at this point .

this isn't like the newsletters that have  you swap a fund heavier in biotech for a fund heavier in consumer staples  which are most of the type that were successful and most of the type  you see today .

this in or out of equity's game rarely ends in the investors favor  trying to time when to be in equity's . 

Yes, mathjak, it seems that they will automatically and systematically allocate your investment portfolio bearing in mind market conditions, your personal situation, and tax implications. I think that they would only go to a 50% VTI (plus 10% EM and 15% International Equities) when their modeling says that it is a "risk on" environment. By doing it systematically they are removing all biases and emotions from the equation. Again, right now they would have me at only 13% total equities.

Reminds me of fabian and his can't fail moving average system . Well that was until if failed.

Personally i like betterment  . This is to much of an all or close to nothing kind of deal on the equity's for my taste. Now once rates on bonds rise do they pull you out of long term treasury's or is this a one trick pony ?

Idk, betterment has no gold, real estate, or commodities.  Just stocks and bonds. Showing 56% stocks and 44% bonds for me. Not showing me much innovation.  Almost simple BH. No tax loss harvesting or alternative assets. No hedging for downside risk. Don't know why I would need them to do the obvious?

You wouldn' t need betterment  if you can do your own models.

I think i would like this one better without the market timing. 

You know if they found the secreat algorithum for when to buy , goldman  or fidelity would pay them billions for it.

This is an awesome potential PP killer, so naturally I am fully onboard.  My portfolio was just established today and it contains:

Cash 2.00%
DBC 3.04%
VNQ 6.06%
GLD 7.99%
AGG 80.91%

I set my risk level to end of the low zone before moderate which seems to be close to the PP.  The settings granularity doesn't seem that fine, there looks to be five broad risk categories.  I may have to tweak it to make sure Bitcoins and private equity are included in the target portfolio.  The system needs two trading days to get full risk statistics, but here's something so far:

Monthly VaR(?)

You have less than a 5% chance of losing -1.45% or more in one month's trading.
This compares to the Risk Parity PP, which could lose -2.01% in one month.

You have less than a 1% chance of losing -3.21% or more in one month's trading.
This compares to the Risk Parity PP, which could lose -3.31% in one month.

Given this allocation, our analysis shows that the maximum amount of money you could lose in any one month is -15.06%. This assumes a once in a lifetime tail event, where all assets become correlated to one another, and they experience their largest historical loss all at once.

Daily VaR(?)

You have less than a 5% chance of losing -0.42% or more in one day’s trading.
This compares to the Risk Parity PP, which could lose -0.66% in one day.

You have less than a 1% chance of losing -0.78% or more in one day’s trading.
This compares to the Risk Parity PP, which could lose -1.11% in one day.

I may try this too, MG. It looks like a nice alternative where you don't have to stress over making your own moves. And what's to stop you from mimicking the portfolio on your own?

Reub wrote: I may try this too, MG. It looks like a nice alternative where you don't have to stress over making your own moves. And what's to stop you from mimicking the portfolio on your own?

Nothing that I can see, but I imagine you lose benefit of no-work tax harvesting and no transanction fees.  And you got to be on the ball about checking for changes, though you get alerts in the inbox.  I almost don't care about the fee on smaller accounts -- its way too seductive to have everything done for you in the proper way that it should be (by my standards).  Been waiting a very, very long time for something like this.

So the biggest benefit I see is they hopefully have a much more sophisticated portfolio rebalancing and adjustment process in response to changing market conditions than the simpler approaches we're forced to rely on as retail investors and the struggle with behaviorial biases, or nothing sophisticated at all with the other robo-advisors (Hedgewise comes close but they're not sophisticated enough).

Of course, the proof is still in the pudding, but I have my fingers crossed!

P.S.  Its fascinating to see the current holdings for the various risk levels.  This is the ideal time to see what it can do with the markets bearish and the PP losing money for 3 years.  I think the PP's days are numbered -- it's almost 30-year old "technology".

hey , don't get like me with the pp is becoming out dated .

Mj, Mg was like you before you were.

Reub wrote: Mj, Mg was like you before you were.

True, you're the new kid on the block, Mathjak.

I just spent some time talking to customer support. One potential downside is that they don't optimize your portfolio as a whole. They treat each of your accounts (e.g. taxable, IRA) as its own portfolio and allocate assets within that account accordingly. So you'll get munis in your taxable account and treasuries in your IRA instead of holding your entire fixed-income allocation in your IRA.

Jack Jones wrote: I just spent some time talking to customer support. One potential downside is that they don't optimize your portfolio as a whole. They treat each of your accounts (e.g. taxable, IRA) as its own portfolio and allocate assets within that account accordingly. So you'll get munis in your taxable account and treasuries in your IRA instead of holding your entire fixed-income allocation in your IRA.

Wow, that sucks!  Do they have any plans on implementing it in the future?

At least they do optimize it as a whole for Bitcoins and private equity, even though those are technically separate accounts.

I would encourage everyone to read the white paper behind their investment philosophy.  It is different from the PP or trend following, more concerned with the present state of risk (volatility & drawdown) versus a floor than identifying historical patterns and making assumptions about the future.

MachineGhost wrote:

Jack Jones wrote: I just spent some time talking to customer support. One potential downside is that they don't optimize your portfolio as a whole. They treat each of your accounts (e.g. taxable, IRA) as its own portfolio and allocate assets within that account accordingly. So you'll get munis in your taxable account and treasuries in your IRA instead of holding your entire fixed-income allocation in your IRA.

Wow, that sucks!  Do they have any plans on implementing it in the future?

I don't think so. He mentioned that different accounts may have different time horizons so there are some benefits of treating each account as its own portfolio

MachineGhost wrote: I would encourage everyone to read the white paper behind their investment philosophy.  It is different from the PP or trend following, more concerned with the present state of risk (volatility & drawdown) versus a floor than identifying historical patterns and making assumptions about the future.

I did! The CPPI section was new and interesting to me.

Hedgeable white paper:

https://www.hedgeable.com/hedgeable-inv ... hite-paper

MachineGhost wrote: This is an awesome potential PP killer, so naturally I am fully onboard.  My portfolio was just established today and it contains:

Cash 2.00%
DBC 3.04%
VNQ 6.06%
GLD 7.99%
AGG 80.91%

I set my risk level to end of the low zone before moderate which seems to be close to the PP.  The settings granularity doesn't seem that fine, there looks to be five broad risk categories.  I may have to tweak it to make sure Bitcoins and private equity are included in the target portfolio.  The system needs two trading days to get full risk statistics, but here's something so far:

Monthly VaR(?)

You have less than a 5% chance of losing -1.45% or more in one month's trading.
This compares to the Risk Parity PP, which could lose -2.01% in one month.

You have less than a 1% chance of losing -3.21% or more in one month's trading.
This compares to the Risk Parity PP, which could lose -3.31% in one month.

Given this allocation, our analysis shows that the maximum amount of money you could lose in any one month is -15.06%. This assumes a once in a lifetime tail event, where all assets become correlated to one another, and they experience their largest historical loss all at once.

Daily VaR(?)

You have less than a 5% chance of losing -0.42% or more in one day’s trading.
This compares to the Risk Parity PP, which could lose -0.66% in one day.

You have less than a 1% chance of losing -0.78% or more in one day’s trading.
This compares to the Risk Parity PP, which could lose -1.11% in one day.

with 6% equity's and trying to time the rest in my bet is on the pp.  i can't see 80% agg at any point in time .

I've joined also. The investing strategy is quite active and very fluid. They really manage and move your money for you. My stock exposure has gone from minimal to over 30% this week alone. It's as if I have Goldman Sachs investing my assets for me every morning.

mathjak107 wrote: with 6% equity's and trying to time the rest in my bet is on the pp.  i can't see 80% agg at any point in time .

I seem to have been put into medium risk "aggressive growth" by my mistake, but on a risk/reward basis that is the sweet spot anyway.  The target portfolio is fully invested in equities and commodities with no fixed income or cash.  I know you would approve!

The monthly VAR for medium is -17% if all assets went to 1 correlation and tanked all at the same time, so it is in line with the Risk Parity PP which is -18.xx% MaxDD historically since 1968 (the Browne PP is somewhat higher because gold's outsized risk overwhelms the portfolio).