What is Automated Investing?

Almost since the very beginning of the stock markets, there have been attempts to define some sort of strategies that would make automated trades for the investor, that would outsmart other market participants and bring back profits with no additional effort.

This is not what the Fundvest app offers. There is no new magical unique financial approach that nobody has tried before, that would be available only for our customers. No, what we offer is easier access to existing financial products that others have created before us. There is no snake oil or secret formula, there are just trusted securities, but you can buy them in an automated and simple manner.

For our automated investment plan, we offer a selection of financial products that are accessible from a public stock exchanges, that are not actively managed and that are working in a predictable way (although past performance is never a guarantee for future results). Let me shortly explain our thought process on this approach:

Accessible from public stock exchanges

We are offering ETFs (Exchange Traded Funds), that are available in public European stock exchanges, denominated in euros. Working with them is very similar to that of stocks, you buy, you sell, they change in value and some of them may pay dividends. There is nothing new to learn, no additional tips & tricks, and no new financial technologies to uncover. Simplicity and stability are key to our choice of offering.

Funds we offer are not actively managed

Any investment funds can be divided into two large groups – actively managed and passively managed. Actively managed funds are run by a team of people who are monitoring the markets daily and are constantly adjusting the content of the fund by buying or selling some assets. While passively managed funds have a defined formula, that is then used to make predictable decisions about the fund. There are still buying and selling ongoing, but it is passive, based on the initial plan, not by some person making decisions on the spot.

Both approaches have pros and cons and can be successfully used by investors in different situations. We have chosen passive funds, as they are much cheaper to run, there are no management fees that our customers would need to constantly pay and overall costs are smaller, as there is no large trading team needed to maintain the fund.

Funds are working in a predictable way

Our selected auto investment plan ETFs all can be classified as one or another type of “index fund”, which in turn means that the fund contains some other securities, that are available in a stock exchange, mostly stocks and bonds, and the decision of which exact security to purchase and in what quantities depends on a predefined “index”.

In an example scenario, if there is an index of top 50 stocks that constantly pay dividends, then it is possible for an index fund to exit that will be built in a way that it purchases stocks of those 50 companies only. And in a predefined proportion of each. And when new stock is added to top50 and another one is removed, then the index fund is adjusted as well.

There are very simple funds like that in our ETF list, and there are more complicated ones, but all of them follow the same principle of an underlying formula that they follow in a very predictable manner.

How automated investment plan works in Fundvest application

It has 3 main steps:

1) The user defines the plan – selects the ETFs to be purchased and defines the proportion between them. How much of each should be in your plan.

2) The user transfers the money to the auto investment account

3) Fundvest purchases units of each selected ETF, in a defined proportion for all the money that is available within the auto investment plan. If money is left over, as we purchase only whole units, then it is used next time new money is added to the plan.

The second point of money transfer to the account can be done manually, or customers can also set up automated payment in their bank, so new money is invested every month when they receive their salary.

This allows our users to invest in a predictable and simple funds, while still doing selection and decisions themselves.

Each of us have some preferences and some view of the future of the world. Somebody might want to do focus more on emerging markets, somebody else will like technology indexes, while yet another person will be all about biotech. And, as an example, keeping also some fund of very stable top world companies as a part of the plan