Make your financial advisor a robot
THE CONCEPT OF HIRING private bankers or financial advisors to manage investment portfolios is common in the world of investment. Clients determine a specific target and their advisors try to build and diversify the portfolio to achieve their target.
Nowadays, the concept of having financial advisors remains the same -except that they may be robots instead of human beings. Machine learningbased advisors created through an advanced algorithm can automate a number of investing processes; from analysing the market to picking the right stock or even managing your entire asset portfolio.
In the digital era, where Artificial Intelligence (AI) is a popular topic, you can refer to Watson, a supercomputer developed by IBM that combines AI and sophisticated analytical software. It is used by an AI-based ETF (Exchange Traded Fund) firm called EquBot to manage retail ETF to pick stocks in much the same way humans have done for a long time.
In Indonesia, Fintech (Financial Technology) is on the rise and has quickly taken on an important role in a country where the rates of the underbanked and the unbankable are still high. The reason why Fintech is so attractive is because of the fast process for its investors to create an account. A Fintech platform can give you a list of potential businesses in which to invest and calculate returns.
What you need to know about Fintech Lending is that it is distinguished between P2P Lending (Peer-to-Peer Lending) and Payday Loans. P2P Lending focuses on productive loans, such as for business or education.
One Fintech lending company has been developing a technology-based investment feature, in lending capital for digital SMEs, called RoboLending for the past two to three years. It has been able to provide consistent returns to its clients. In 2016 and 2017, lenders in the platform managed to achieve average annual returns of 19 percent and 20 percent. RoboLending offers automated investment experience for its lenders.
This feature has been developed by KoinWorks, one of Indonesia’s leading Fintech Lending companies, which has been registered and supervised by the OJK (Financial Services Authority) and focuses on productive loan sector. It was awarded the Most Innovative Fintech of the Year 2017 Award by Bisnis Indonesia. KoinWorks was recently backed by a consortium led by Mandiri Capital Indonesia for US$16 million.
A new wave of alternative investment through P2P Fintech platforms such as KoinWorks has emerged. KoinWorks allows you to allocate a certain amount of money using its proprietary machinelearning powered investment feature, RoboLending, to achieve a certain target of return over a period of time.
How does RoboLending differ from an AI-powered investment manager and perhaps other instruments? KoinWorks conducts tight assessment processes on each of its products. If a product qualifies, a specific Grade will be set from A1 to E5 (a total of 25 Grades).
The Grades represent the risk level and interest rate. The closer the product to A1 Grade, the lower the risk but the interest rate is also lower and vice versa. The fun thing is, every investor can choose which product to invest in based on some criteria, such as interest rate, risk level and tenor, which will depend on their preferences or risk tolerance.
To mitigate the risks, lenders are advised to diversify their investment funds into several product at once. It is also recommended to invest in products with various risk levels and interest rates. RoboLending will automate all of the investment processes to achieve a predefined interest rate gained within a specific duration.
Say a RoboLending loan with 12 months of tenor has a 13 percent interest rate. It will learn and give returns based on the market and the lender will gain on average 13 percent returns per year at the end of the tenor (lump sum). The advanced machine learning will make that happen by calculating the interest rate of each available product and analysing the risks to make it possible to gain 13 percent within a year.
The interest rates will vary according to available tenors and risk levels. The higher the risks, the higher the rates as the rewards. It will be a great fit if you’re looking for a long-term investment, especially if you prefer to “invest and forget”.
There are many asset classes available for investments, such as time deposits, stocks, mutual funds, obligations, gold and so on. But a new breed of alternative investment, specifically Fintech, is on the rise and gaining popularity. Do you want to ride with the new era of digital investment?