COMPUTATIONAL INVESTMENT

Two new consumer-grade investment services have come to market and both are using software to get you good returns.

HERE’S THE SET-UP: asset management fees erode your returns at an alarming rate. Using AI, instead, eliminates most of the human cost and also makes exchange trading more accessible to ordinary people.

Not convinced? Okay. Assume an investment period of 20 years with gross returns of 15 per cent per annum and inflation of 6 per cent. With 3 per cent asset management costs, you lose almost 42 per cent of your returns. And that’s in an ideal situation.

Now consider that ETFS (exchangetraded funds) regularly outperform the market, sometimes by close to 80 per cent. What does that mean? Simply put: services that track an index are getting better returns than professional asset managers trading in real time. And did you know that ETFS are far cheaper?

Itransact has recently introduced an online platform called Itransact GO, which promises to be completely independent – meaning it won’t carry any bias – and adaptive to your changing risk profile. The sign-up process is slick on the website and there’s a great tool that you can play with to estimate the time or size of investment you’ll need to reach your goal. You choose your lump sum, the monthly debit order and duration of investment and the AI tailors a mix of ETFS to match your specified needs.

What puts artificial intelligence at an advantage is that it has real-time access to historic data and can make instant adjustments to projections as the market shifts. The system also reshuffles and rebalances your portfolio once a week.

Lance Solms, head of Itransact, was quick to state that the service is offered to complement the Itransact financial advisors as well as to cater to self-help investors. The company will also continue its primary activities, of which the bulk relates to automated outsourcing services for the likes of Absa and SATRIX.

Change agent Meanwhile, in the mobile app world, Liberty has brought an innovative invesment service called “STASH” to the South African consumer. Only available on Android for now, STASH lets you round up on all your card swipes (to the nearest R10, R20 or R50 currently) and invests the “spare change” in an ETF that tracks the top 40 index.

The app is free to download, free to use and Liberty even gives you R50 as a starter pack for the launch phase (basically until March 2018). What’s in it for them? Data. The app is completely safe and you can stop it from stashing or liquidate your investment at any time, but you need to be comfortable with Liberty having anonymous, randomised sample data of spending habits for your demographic.

The app essentially intercepts your SMS notifications from your bank whenever you swipe, does the round up calculation, requests a merchant token from Snapscan (which manages the transaction encryption) and presents that token to your bank. You can cancel your daily stash before 1 pm each day and the day’s stash is collected at midnight. It’s super convenient.