mz27514 Posted November 20, 2020 Share Posted November 20, 2020 Looking for feedback for the following scenario: “Predictive equity analytics” addresses equity market risk and returns using graphical reports that warn beforehand of market downturn as well as enable capture of gains. “Essentially the quantitative predictive equity analytic capability found in investment banks and financial intermediaries is made available directly to 401(k) participants in a user-friendly manner." Would 401(k) participants be better off directly managing their accumulated wealth within their accounts if given the proper predictive equity analytic tools and training or would they be better off restricted to the menu of funding vehicles? Link to comment Share on other sites More sharing options...
Luke Bailey Posted November 23, 2020 Share Posted November 23, 2020 Personally, I always recommend a crystal ball. Jim Chad and Bill Presson 2 Luke Bailey Senior Counsel Clark Hill PLC 214-651-4572 (O) | LBailey@clarkhill.com 2600 Dallas Parkway Suite 600 Frisco, TX 75034 Link to comment Share on other sites More sharing options...
Mike Preston Posted November 23, 2020 Share Posted November 23, 2020 20 minutes ago, Luke Bailey said: Personally, I always recommend a crystal ball. Just as accurate. Bill Presson 1 Link to comment Share on other sites More sharing options...
QDROphile Posted November 24, 2020 Share Posted November 24, 2020 The rear view mirror is a preferred analytic. Link to comment Share on other sites More sharing options...
MWeddell Posted November 24, 2020 Share Posted November 24, 2020 If someone could reliably predict the direction that the stock market will take in the near future, that person would not be selling their secret to others. In other words, don't believe the hype. Link to comment Share on other sites More sharing options...
david rigby Posted November 24, 2020 Share Posted November 24, 2020 "Don't gamble; take all your savings and buy some good stock and hold it till it goes up, then sell it. If it don't go up, don't buy it." Will Rogers I'm a retirement actuary. Nothing about my comments is intended or should be construed as investment, tax, legal or accounting advice. Occasionally, but not all the time, it might be reasonable to interpret my comments as actuarial or consulting advice. Link to comment Share on other sites More sharing options...
Patricia Neal Jensen Posted November 24, 2020 Share Posted November 24, 2020 Humorous but the item is inappropriate for this forum. Patricia Neal Jensen, JD Vice President and Nonprofit Practice Leader |Future Plan, an Ascensus Company 21031 Ventura Blvd., 12th Floor Woodland Hills, CA 91364 E patricia.jensen@futureplan.com P 949-325-6727 Link to comment Share on other sites More sharing options...
mz27514 Posted December 10, 2020 Author Share Posted December 10, 2020 The goal is to accumulate wealth (capture gains), avoid drawdowns, provide maximal control (liquidity) in the most cost-effective manner over a lifetime in a 401(k) plan. "predictive equity analytics" is new and more information is available upon performing an internet search. Disbelief or denial is commonly reported upon learning of “predictive equity analytics.” ‘predictive equity analytics’ is the notion of “taking the quantitative research capability that is normally found inside an investment bank, hedge fund or financial intermediary and providing limited public access.” An investor can provide the services to themselves (made possible through predictive equity analytics), employ a third party to provide the services in a fiduciary role or provided in a non-fiduciary role or purchase an annuity insurance product. The third party or insurer may or may not employ predictive equity analytics. Optimally, if the investor can independently monitor performance of third party using predictive equity analytics then current fiduciary regulations are sufficient and " it is not the case - thrown out." It is the introduction of monitoring capability (made possible using predictive equity analytics) that enables concurrence of investor and third-party advisor over time. More fiduciary regulations are not needed. It is a manner of investor preference to employ predictive equity analytics in monitoring role or to extend to active trade role at any point in time. Traditionally, attainment of the above goals took the form of an annuity. With large banks and financial intermediaries offering 0 transaction fees and no minimum balance, "the situation has changed and merits review." The fact that 401(k) fund balances suffered severe drawdowns in 2008, 2018 and 2020 supports more control to participants is warranted. Consider the situation where a 401(k) offers a standard set of mutual and ETF funds with a brokerage capability to customize portfolios to participants. The ability to select stocks at optimal price and time is the missing link that is provided by predictive equity analytics. With predictive equity analytics participants have ability to change funds and contribution levels on an informed basis independent of third-party fund managers to capture gains and avoid drawdowns. By selecting stocks forecast to appreciate, participants can realize gains greater than fund managers. Now view outside 401(k), employees can invest in stocks expected to increase using after tax dollars outside of 401(k). 401(k) annuitization rates are based on forward projection of interest rates by duration which in our current environment are "low and will remain low." Forecast of future equity market returns (after transaction costs and tax) is greater than forecast of future interest rates. There are two requirements for successful equity investment: 1) 0 or low trade transaction cost 2) equity research (uses past info, ) or better predictive equity analytics (predicts short term future) - which serve for stock selection, timing and price. If an insurer can satisfy the above criteria as an annuity product, terrific - should be easy product to sell ( above average returns , generous crediting formula, low cost additional riders for say LTC etc.) and agents lining up to sell it ( generous commission structure ). The annuity election sacrifices a good deal of control, may not be cost-effective over-all horizons and forgoes significant further wealth accumulation due to premium payments. If a third-party advisor in fiduciary role or non-fiduciary role can provide the same services, we would see higher returns exceeding competitors which would attract more business. If an investor can attain these goals using an alternative such as predictive equity analytics which satisfies all above the above criteria, this is certainly the optimal solution provided the individual takes an active role which means scanning the market for return opportunities and avoid drawdowns daily or at least a minimum of 2 - times per week. Financial economics informs us that where multiple channels are introduced that compete to attain the same goal or set of goals then the investor or plan participant is made better off through a menu of choices with associated costs. Link to comment Share on other sites More sharing options...
Mike Preston Posted December 10, 2020 Share Posted December 10, 2020 3 hours ago, mz27514 said: The goal is to accumulate wealth (capture gains), avoid drawdowns, provide maximal control (liquidity) in the most cost-effective manner over a lifetime in a 401(k) plan. "predictive equity analytics" is new and more information is available upon performing an internet search. Disbelief or denial is commonly reported upon learning of “predictive equity analytics.” ‘predictive equity analytics’ is the notion of “taking the quantitative research capability that is normally found inside an investment bank, hedge fund or financial intermediary and providing limited public access.” An investor can provide the services to themselves (made possible through predictive equity analytics), employ a third party to provide the services in a fiduciary role or provided in a non-fiduciary role or purchase an annuity insurance product. The third party or insurer may or may not employ predictive equity analytics. Optimally, if the investor can independently monitor performance of third party using predictive equity analytics then current fiduciary regulations are sufficient and " it is not the case - thrown out." It is the introduction of monitoring capability (made possible using predictive equity analytics) that enables concurrence of investor and third-party advisor over time. More fiduciary regulations are not needed. It is a manner of investor preference to employ predictive equity analytics in monitoring role or to extend to active trade role at any point in time. Traditionally, attainment of the above goals took the form of an annuity. With large banks and financial intermediaries offering 0 transaction fees and no minimum balance, "the situation has changed and merits review." The fact that 401(k) fund balances suffered severe drawdowns in 2008, 2018 and 2020 supports more control to participants is warranted. Consider the situation where a 401(k) offers a standard set of mutual and ETF funds with a brokerage capability to customize portfolios to participants. The ability to select stocks at optimal price and time is the missing link that is provided by predictive equity analytics. With predictive equity analytics participants have ability to change funds and contribution levels on an informed basis independent of third-party fund managers to capture gains and avoid drawdowns. By selecting stocks forecast to appreciate, participants can realize gains greater than fund managers. Now view outside 401(k), employees can invest in stocks expected to increase using after tax dollars outside of 401(k). 401(k) annuitization rates are based on forward projection of interest rates by duration which in our current environment are "low and will remain low." Forecast of future equity market returns (after transaction costs and tax) is greater than forecast of future interest rates. There are two requirements for successful equity investment: 1) 0 or low trade transaction cost 2) equity research (uses past info, ) or better predictive equity analytics (predicts short term future) - which serve for stock selection, timing and price. If an insurer can satisfy the above criteria as an annuity product, terrific - should be easy product to sell ( above average returns , generous crediting formula, low cost additional riders for say LTC etc.) and agents lining up to sell it ( generous commission structure ). The annuity election sacrifices a good deal of control, may not be cost-effective over-all horizons and forgoes significant further wealth accumulation due to premium payments. If a third-party advisor in fiduciary role or non-fiduciary role can provide the same services, we would see higher returns exceeding competitors which would attract more business. If an investor can attain these goals using an alternative such as predictive equity analytics which satisfies all above the above criteria, this is certainly the optimal solution provided the individual takes an active role which means scanning the market for return opportunities and avoid drawdowns daily or at least a minimum of 2 - times per week. Financial economics informs us that where multiple channels are introduced that compete to attain the same goal or set of goals then the investor or plan participant is made better off through a menu of choices with associated costs. Rotflmao Link to comment Share on other sites More sharing options...
mz27514 Posted December 11, 2020 Author Share Posted December 11, 2020 Predictive equity analytics was featured machine learning topic for hedging of life insurer equity risk benefit guarantees contained in life annuity products such as guaranteed accumulated value at point in time or return of premium with X% roll-up ( e.g. 2 - 3 - 4 %). Predictive equity analytics provides a significantly lower cost natural hedging instrument and is used in conjunction with costly stochastic hedging techniques. For more information see 2020 Society of Actuaries Annual Fall Meeting (October 2020.) This thread is intended to measure the interest and feasibility of expanding application of predictive equity analytics to areas outside of insurance such as 401(k) plans which benefit from avoidance of downturns and capturing of investment gains. As a new technique, gathering of different viewpoints in one location benefits all who are interested in intelligent discussion of how best to accumulate wealth by avoiding drawdowns and capturing gains in the most cost-efficient manner over one’s lifetime. For those so inclined, there is a Github project available to facilitate creation of predictive rules using machine learning and deep learning frameworks like TensorFlow (using gpu configuration). Link to comment Share on other sites More sharing options...
Bird Posted December 11, 2020 Share Posted December 11, 2020 I guess we will leave this thread going for entertainment value? Let's see how many times a bot can egest random words from a blender. Ed Snyder Link to comment Share on other sites More sharing options...
C. B. Zeller Posted December 11, 2020 Share Posted December 11, 2020 I'll give you the benefit of the doubt and try to give you a serious reply. 401(k) participants are overwhelmingly not professional investors. They have regular jobs, families, homes, hobbies and they are not getting paid to manage their portfolio. Probably the last thing they want to in their free time is read reports from the Society of Actuaries or browse Github projects. Research like this will be most useful to them if it can be incorporated into a lifestyle-type fund that is "set and forget" from the participant's perspective to help them achieve better returns in the long term. Free advice is worth what you paid for it. Do not rely on the information provided in this post for any purpose, including (but not limited to): tax planning, compliance with ERISA or the IRC, investing or other forms of fortune-telling, bird identification, relationship advice, or spiritual guidance. Corey B. Zeller, MSEA, CPC, QPA, QKA Preferred Pension Planning Corp.corey@pppc.co Link to comment Share on other sites More sharing options...
MWeddell Posted December 11, 2020 Share Posted December 11, 2020 19 hours ago, mz27514 said: Disbelief or denial is commonly reported upon learning of “predictive equity analytics.” ‘predictive equity analytics’ is the notion of “taking the quantitative research capability that is normally found inside an investment bank, hedge fund or financial intermediary and providing limited public access.” Left unsaid is that disbelief is a rational response until evidence is presented to the contrary. Are there are any studies claiming that those who have used "predictive equity analytics" have outperformed index funds? If so, how did the studies control for any publication bias? Link to comment Share on other sites More sharing options...
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