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Sophisticated investors use investment algorithms to develop an investment strategy in today's stock market environment.

The sophisticated investor questions what he’s told. For example, for a long time you’ve probably heard the advice, “If you want protection of principal you have to own a CD or short-term Treasuries.” No doubt you’ve also been told, “If you want to have high rewards or returns you’ve got to take a lot of risk.”

In response, you’re probably thinking, “Is that really a sound investing strategy?”

As a sophisticated investor you’re also already aware that such theories hardly stand the test of time – especially in today’s global stock market. In an unprecedented highly correlated world, with low interest rates that cannot keep up with inflation, the old standard investment strategy theories crumble. To us, that’s okay. We live by the mantra, “Adapt or die.”

In the face of today’s ever-evolving and uncertain stock market environment we don’t think you have to settle for either preserving capital or capturing upside. We believe there are better ways to run capital. As a smart investor you probably do too – and you’re right. Investment algorithms are the answer.

Listen to the 10-minute podcast below to learn about the:

  • inequality between individual investors and institutional investors
  • battle over stock spreads
  • rise of the machines in response to tightened spreads
  • new “inside information”

Then, continue reading

Individual Investors vs. Institutional Investors: The Information Gap

by Bret Rosenthal

It’s time for every sophisticated investor to take advantage of the strong, post-2008 tool: Algorithms. Straight from the Rosenthal Capital Management trading desk, Head Trader, Principal and Chief Algorithm Architect, Bret Rosenthal, explains the current stock market environment and how algorithms level the playing field for individual investors.

Have questions about what you hear on the podcast or read in the investment algorithm article? We love answering follow ups: Call or email us.

INVESTMENT ALGORITHMS: THE SOPHISTICATED INVESTOR’S NEW TOOL

Recognizing the need to incorporate algorithms into his investment strategy becomes the most important action a sophisticated investor can take in today’s stock market climate. The new question to ask is, “How can I access this powerful investment strategy tool? Who has investment algorithms that I can actually work with?” And so the quest begins for an investment advisor who:

  • understands that the playing field has changed
  • uses investment algorithms to help invest in the stock market
  • implements flexible algorithms to drive the investing process

In the past investment algorithms were only accessible to the elite institutional investor. Today, however, many other institutions have developed their own personal access. For example, here at Rosenthal Capital Management we have spent time and our own corporate funds to write computer code and build proprietary investment algorithms.

After five years of development this process has become the foundation of what we do and guides all of our efforts in managing capital. It is the core of our investment strategy mission and allows us to help the sophisticated investor bridge that gap between himself and major institutional investors. We’ve focused our efforts in this area partly to adapt to the changing stock market investing environment, and partly in an effort to support the “new tool” movement.

CONCLUSION: ANALYTICAL TOOLS HAVE CHANGED

As an investment advisor I meet many people and speak with many other investment advisors. Over and over I’m surprised when I hear the same refrain: Most stock market investors are still using the same techniques (old tools) during this post-2008 algorithmic revolution as they were using pre-2008. They’re looking at valuations and all kinds of investing strategies that you would have used in the last 50 years. Those tools just don’t apply as well in today’s world where algorithms are the new form of inside information. As a result, the individual investor suffers.

We believe proprietary algorithms are a powerful way to level the playing field. This notion stems from our deep-rooted belief that the ability to protect capital while still capturing upside (a major possibility in algorithmic investing) should be available to everyone.  We’re in the trenches helping to bridge the gap so that any sophisticated investor who wishes to join the new tool movement has a way to do so.

 

 

 

 

 

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