Side note here before we stat, if there is one thing to learn from this website and never to return, is simply this:
start saving and investing as early as possible, no matter what the strategy, it will make a great difference down the road, or as per this quote attributed to Albert Einstein:
“Compound interest is the most powerful force in the universe.”
This story was written originally for Hacker News Show HN submission, without realizing, there is a 4000 character limit :-) and edited a bit after some feedback from the community
Special Thanks to Daniel (dang), the moderator of Hacker News for his time, great advice and all help with this!
Dear Friends, my name is LJ and I am the Founder of Alternative Systems and Technologies. We are changing the world by making Passive Investing Safer and Better for all investors!
I have been in the IT business for over 30 years, spanning 5 companies on 2 continents, building great teams and now is the time to start my own :-)
It has been a long journey to say the least, but no regrets, as it brought me right here with you at this moment :-)
My story begins like every one else, as a kid :-) I was fascinated with business empires, one of my favourite books is the Asian Saga by James Clavell and I was always interested in the stock market and the mystery surrounding hedge fund managers, almost like being able to see the future and profit from it…
Started working early at 18 as jr. sys admin, the pay low and after a while much better and I spend it all as fast as I got it…
Fast forward few years, few jobs and a continent… making good money and with new born baby, I have decided to start investing for the future and this is where my problems began…
Diversified portfolio of mutual funds, that was what I came up with - pretty much investing equally in the 5 mutual funds available through my employer and the life and science fund did great for a bit before the dot com crash :-)
During the dotcom bust, I changed jobs and had to sell the funds, because in kind transfer was not possible with the new employer and lost most of the money...
Needless to say, it was scarring experience, so I stayed in money market funds (to save for a house down payment) and missed the market upside...
Few years latter, another job, another pension plan and this time I was determined not to make the same mistakes...
Everyone is saying Passive Investing is the best for the average investor, but they never tell you what index fund to buy and more importantly when exactly.
Just holding an index fund for the long term can be actually a mistake and if you’re in the wrong index at the wrong time, it can take you 5, 10, or even 15 years just to break even…
In the last 20 years or so, we had 2 major black swan events resulting in two 50% drawdowns and drawdowns are very important to avoid, because the market might remain under water for very, very long period of time, just check Japan, the strongest market in the world at the time, is still almost 50% down from it's peak for 30 years and counting! Imagine being buy and hold investor about to retire...
On top of that, every 50% drawdown or loss will require 100% gain, just the break even.
It gets even worse at the bottom of a recession/financial crises. This is where people lose jobs and needs those funds to survive and if you are down already 50% and take half of the rest to live off until you find the next job, there is no coming back from this as if you are down 75%, you will need 300% gain to break even, 80% loss will need 400% gain, etc…
There has to be a better way to manage risk, buy and hold just didn’t work for me, I got scared when market is way down, and life happens, the worst thing is to withdraw money at the bottom for family emergencies or to help a loved one... there is no recovery from that...
In the end, the Passive Investing is an active decision by itself , if you think about it …
I bought books, bought data, subscribed to data feeds, red articles and white papers, ran servers in the basement crunching numbers non stop and testing anything i came across or can think about, until i created an early version of this model and just in time before the financial crisis, even tough it was not fully implemented at the time it did save me from the down turn and since then is constantly validating the model.
Along the way, crunching numbers became a hobby somehow and we started generating other ideas, better returns, etc…
Right now I am running multiple servers in the cloud around the world collecting and analyzing data and automating the investing decisions for me, and I have been using this model in my personal investing for many years as proof of concept and I do have all the back-testing going back to 1928.
You can check the Research tab on the website, basically the Art Invest model delivers the same returns compared with Buy and Hold model, but cutting the drawdown by half: worst draw down 23.83% vs 56.48% for the buy and hold model, which means you need less than 33% gain to break even vs more than 122% gain needed to break even with the Buy and Hold Model
Not long ago while speaking with friends and co-workers about the way I invest, it actually donned on me that this can be an actual company, as I have the back end already up and running for years, so I have put together this simple website and I am applying to YC and hopping to create a company that can truly change the way people are investing for the long run.
How it works is the systems sends an email or a SMS advising every Friday after the market close advising to be either in Cash or invested in any low cost S&P tracking 500 ETF / mutual fund / employer provided fund.
It can also be offered as a service to financial advisors, banks, etc so we can reach out and help more people…
I know long term and passive investing is boring and in this model the average portfolio change happens once a year, with maximum 4 changes per year once and some years no change at all…
To make it a bit more interesting and engaging, I decided on sending a weekly email, so the user would know that the robots are watching over the portfolio at all times and I believe this is very helpful especially during small market downturns, turbulent times, bad news cycles, etc…
Also, from the Startup School, I got the idea on how to get people more engaged – with the “Make Money with Us” feature, basically you get 50% referral commission every month on every user you bring along. This way you you can spread the word to all your friends and show them how it invest better and also offset the subscription costs: you get 2 users to sign and the subscription is free and if you get let’s say 10 users, you can generate $1200 per year real passive income to help you start investing if you do not have the spare cash to do so…
I have a Free education page with links to some research, books, podcasts and data links to help start someone on the proper path of investing for the long run…
Here the direct link for the community to sign up for 1 free month (you can cancel the subscription at anytime directly through PayPal), so please sign up and take a look, or just take a look without signing, but please let me know what do you think, what do you like, don’t like, and please share any feedback, ideas, recommendations, etc , it will be greatly appreciated, so we can make the product batter and more useful for everyone.
Last, but not least, I am actually looking for a sales/marketing/growth co founder to join me (or even 2 co-founders one responsible for end user sales and marketing and the other responsible for corporate partnerships where we can license our product for example or a mixture of both. I just signed up to Startup school Co-Founder Match program, but there are a lot of profiles and most people area already working on their own ideas and looking for a technical co-founders, so if someone is interested, please let me know, but please be aware it will be a long wetting process and I would need a real results in terms of sustainable user and revenue growth before committing to anything…
This is just the start; I have other ideas and models, some generating much higher return with similar risk profile and will be offered to employees and investors, similar to the RenTec Medallion fund
Truly it is not about the destination, but the path you take and we would like to recapture this feeling with new and exciting projects...