“I’m interested in automated investing but having trouble taking the leap.”
“Is automated investing a good approach?”
“I’m concerned about entrusting the management of my money to robots.”
Recently, there has been a lot of talk about robots and AI, like ChatGPT, and it’s understandable to be cautious about entrusting your assets to a robot.
The internet is flooded with information and conflicting claims, making it challenging to find the right fit for yourself.
To help, I will leverage my 30+ years of investing experience to explain the stress and issues associated with traditional investing, and delve into the value of automated investing systems. I will also introduce my unique, self-developed automated system, created through years of research and testing.
By reading this article to the end, you will not only grasp the benefits of automatic investing but also understand how my Signal plan combines automation with human elements to create an outstanding system.
Contents
- What is an Automated Investing System?
- Exploring the Benefits of Automated Investing
- Signal System: The Automated Investing System I Developed
- The Kelly Letter: Why It Excels Over Robo-Advisors in Automated Investing
- Summary
1. What is an Automated Investing System?
An automated investing system usually refers to a method of managing investment portfolios using computer algorithms and technology. It involves the use of online platforms or apps, where computers select and manage investments on behalf of investors.
2. Exploring the Benefits of Automated Investing
- Avoid paying high fees to investment advisors.
- Reduce stress and anxiety.
- Make decisions without being influenced by emotions.
- Prevent excessive impatience and reactive behaviors.
- Avoid reckless actions driven by overconfidence.
- Prevent judgment errors caused by information overload.
Before delving into the benefits of automated investing, let’s consider what is expected of you before you start investing. These are likely things you already know from various books, websites, and personal experiences, so I’ll provide only a brief overview:
- Financial goals and planning: You need to understand your investment objectives, risk tolerance, and investment time frame, and develop an investing strategy based on them.
- Risk management ability: Investing involves inherent risks. You need the ability to manage losses resulting from market fluctuation and price changes in investment products.
- Time and patience: Investors need to have patience and take a long-term view when making investments. Investing is not trading.
- Research and information gathering: You’ll need information on market trends, company financials, and other relevant data to make informed investment decisions.
- Decision-making skills: Good investors analyze information and make rational decisions in a calm and logical manner.
- Willingness to learn and adaptability: The best investors are eager to learn, keep their minds open to new information, and adapt to new investment approaches—even unconventional ones.
In addition to these, it’s important for beginners to accumulate knowledge and experience in investing.
Investing involves using your own and your family’s valuable assets. As I mentioned above, it requires certain qualities and is not an easy task, because it comes with inherent risks. Additionally, it can create various psychological and emotional challenges.
The following are common issues that investors experience, which I hear about from my readers on a regular basis:
- High advisory fees: Banks and brokers charge significant fees.
- Stress and anxiety: Market fluctuations and investment outcomes can lead to losses, causing stress and anxiety. Even paper losses cause some people to lose sleep.
- Emotional decision-making: Investors need to make rational decisions, but they can be influenced by emotions, leading to distorted thinking and decision-making. Even pros fall prey to this, and cognitive biases, which lead to errors in judgment.
- Excessive impatience and reactive behavior: Excessive impatience and reactive behavior can result in short-term trading and portfolio disruptions, and derail a carefully-laid long-term plan.
- Overconfidence: Some investors show excessive confidence in their judgments and predictions, leading to underestimating risks and engaging in reckless investing actions. As one investing pro friend of mine puts it, “People who bet the farm, lose the farm.”
- Information overload: Excessive consumption of information and information overload can make decision-making difficult and increase the risk of being misled by inaccurate or false information.
To address these issues, it’s important to deepen your investing knowledge, control your emotions, and engage in rational analysis and decision-making. These require a significant amount of time and experience. Therefore, I recommend automated investing as a solution that can mitigate these challenges.
It will enable you to:
Avoid paying high fees to investment advisors.- Reduce stress and anxiety.
- Make decisions without being influenced by emotions.
- Prevent excessive impatience and reactive behaviors.
- Avoid reckless actions driven by overconfidence.
- Prevent judgment errors caused by information overload.
Automated investing offers all of these advantages.
Next, I will introduce you to the details of my Signal system, which is operated by a human (me) while incorporating the benefits of automation.
3. Signal System: The Automated Investing System I Developed
My name is Jason Kelly.
I began researching investing in the early 1990s, and have been writing books and articles about the financial markets since 1994. You may have read my bestselling introductory stock book, The Neatest Little Guide to Stock Market Investing. I am recognized as a financial expert worldwide, and my works have been translated into over 10 languages, with my ideas being featured on television, radio, podcasts, and in publications.
However, I’ve never worked on Wall Street, nor have I managed other people’s money.
Instead, I dedicated myself to researching, testing, iterating, and sharing what I have discovered. I wanted to provide an affordable, effective, and straightforward system. During more than 30 years of experience, I conducted extensive research to develop a system that takes a rules-based approach, offering the advantages of automation while still being managed by a human, rather than relying on algorithms. This is what the Sig system is all about.
Let me explain it briefly.
The simplest “3% Signal” plan, which is the subject of my book, The 3% Signal, involves using just two funds: a stock fund and a bond fund. Every quarter, it takes the following steps:
- If the profit of the stock fund exceeds 3% during the quarter (for example, if a balance of $100,000 goes above $103,000), the surplus amount is sold, and the proceeds are invested in the safe bond fund.
- If the profit of the stock fund is less than 3% or the fund declines in value, money is transferred to the lower-priced stock fund from the safe bond fund up to the 3% target level, to compensate for the shortfall.
By following this approach, the 3% Signal plan automatically adjusts the allocation of capital based only on the price change of the stock fund—no pundit guessing games—and achieves the investing masterstroke of buying low and selling high. It minimizes risk and maintains an appropriate asset allocation.
Here’s how the process looks:
Did you notice that in this system, you don’t need any information apart from price fluctuation? This is key to the plan’s success.
When you take this approach, you will no longer be swayed by news and commentary, or feel pressure to make accurate future predictions, or rely on luck. All you’ll need to do is follow the simple set of rules and take action once per quarter.
This system resolves the shortcomings associated with traditional investing approaches advocated by high-priced advisors. It frees you from investing stress and enables you to dedicate your time to more meaningful activities, as your money grows in the background.
4. The Kelly Letter: Why It Excels Over Robo-Advisors in Automated Investing
My Sig system is a rules-based approach that calculates and executes trades based on predefined rules. Therefore, once you understand the rules, there is no need for human assistance or robots. However, in our daily lives, we are bombarded with sensational news from television and the internet, which can confuse our thinking and lead to panic. Even experienced professional investors face this challenge.
I mentioned earlier the problems associated with investing and how automated investing systems can solve them. While this is true, let’s examine the reality. How do humans perform in situations such as the covid crash of March 2020, when their portfolios rapidly decline?
In such circumstances, robots continue to invest calmly based on their algorithms.
But what about humans?
People who can withstand such situations without any support might want to try robo-investing. However, even experienced individuals may need reliable perspective and assistance when faced with such stressful circumstances.
The Kelly Letter has used only the Signal system since 2016, and has seen it through numerous big-headline events. The covid crash of March 2020 was the biggest stock market crisis during the time frame, which nobody anticipated, as I’m sure you are aware.
Even long-time subscribers to The Kelly Letter, who are investors themselves, also experienced panic in a similar manner. Everything was in an unknown state, with the world at a standstill, and nobody had a clear outlook for the future. I couldn’t predict what lay ahead. However, I was able to take action by following The Kelly Letter’s system. Weekly newsletters, subscriber forums, and Zoom calls with me served as crucial support, alleviating subscribers’ stress and anxiety, enabling them to continue running the system.
As a result, many people were able to endure the crisis and achieve significant profits in 2020 and 2021, as you can see on the letter’s performance chart:
Even in automated investing, you will inevitably experience anxiety and stress. The abundance of information and mainstream financial media’s attempts to manipulate your emotions make it challenging to stay true to a disciplined approach. The constant “buy this, sell that, watch out” tone of media presents a significant challenge to some automated investors as well.
The Kelly Letter, emailed every Sunday morning, offers several advantages over robo-investing, including the following:
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Only Highly Relevant Information: I decipher and deliver only the necessary news from media’s information overload, which is so extreme that it’s sometimes hard to know simply what happened. |
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Alleviation of Anxiety: Based on quantitative evidence, I approach the market logically and analyze the movements of the world from a realistic perspective. Careful data analysis is invaluable, and increasingly rare. |
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Support in Maintaining the System: With logical explanations, I help alleviate your anxieties and navigate challenging times alongside you. |
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Forums with Me and Other Members: From beginners to veterans, members have the freedom to engage in discussions and learn from one another. |
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My Easy Investing Calculator: Members enjoy access to my online calculator to determine their quarterly investing actions. It includes an “Allocator” tab to easily follow the letter’s new quarterly allocation. |
The Kelly Letter provides a superior support system compared with other forms of automated investing, helping to alleviate anxieties and stresses associated with the stock market.
Here are some testimonials from subscribers to The Kelly Letter:
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Jason breaks through our news bubble each week with a fairly-priced and independent perspective, practical guidance, the latest ideas under consideration, and a weekly coaching session which is crucial for many of us!
Mike Capern and Donna Capern |
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Jason Kelly’s weekly encouragement in his newsletter helps me stay the course. For that alone, I’m grateful and the newsletter reinforces sanity when many other venues suggest calamity.
Byron Anderson |
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The Kelly Letter is the only investment newsletter needed for anyone who is interested in understanding how markets work. Not only does it provide excellent economic commentary and clear investing advice, it is also full of deep philosophical insights and provides great tools to learn and apply various lessons in life. I am thankful for being part of The Kelly Letter subscriber community and hope it continues to grow in popularity.
Vasco Gurch |
5. Summary
In this article, I covered the following topics:
- What is an Automated Investing System?
- Exploring the Benefits of Automated Investing
- Signal System: The Automated Investing System I Developed
- The Kelly Letter: Why It Excels Over Robo-Advisors in Automated Investing
With the recent advancement of AI, automated investing has become a popular investing approach adopted by many individuals. Systematized investing methods offer numerous advantages.
However, as mentioned above, even with automated investing it is not possible to completely eliminate human emotion and uncertainties. Maintaining a calm mindset is challenging. Please take this point to heart.
The Kelly Letter is delivered every Sunday and offers the following features:
- Investments are made according to a complete set of rules on a quarterly basis. Subscribers have access to additional Signal plans, including 6%, 9%, and Income, as exclusive benefits.
- The letter presents numerical evidence, logical analysis, and a realistic perspective to help you understand the small subset of information that matters.
- It deciphers and analyzes only the essential news.
- It provides excellent support to alleviate the concerns and stress associated with investing.
My goal is to help subscribers achieve not only financial success, but also provide them with the time and mental freedom they desire.
If you found this intriguing, I would be delighted to welcome you as a subscriber. If you have any concerns or questions, please don’t hesitate to reach out to me.
I wish you well in your investing journey!
