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Here’s Why Your Investment Strategy Should Not Be Based on Online Recommendations

There are some essential reasons why your investment strategy must not be based on online recommendations alone. Here’s why:

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Here's Why Your Investment Strategy Should Not Be Based on Online Recommendations
Here's Why Your Investment Strategy Should Not Be Based on Online Recommendations. Pixabay

An investment strategy is a plan of action taken by investors to guide their financial
decisions on the basis of their investment portfolios. A well-written and measurable
investment strategy is the key to success of every investor. Furthermore, with the
right professional recommendations, these strategies can offer more ways of
creating better financial security.

However, today, the human financial advisors have been replaced by online
recommendation systems, an intelligent information filtering platform that assists
investors to narrow their decision-making process. Online recommendations have
become an integral part of user experience in the investment sector.

Yet, the question still remains that even though online recommendations are
changing digital reality for investors, are they good for investment strategy? The
answer is No!

There are some essential reasons why your investment strategy must not be based
on online recommendations alone. Here’s why:

You're not talking to a real person
You’re not talking to a real person. Pixabay

#1 You Are Not Talking to A Real Person
Online recommendations systems follow a universal algorithm due to which users
are siloed into separate segments. It does not tailor your products according to your
needs.

The system only understands that you want to create a plan, but it does not consider
how would you like it to be and what factors are supposed to be taken into
consideration.

The ultimate drawback is that you are not talking to a person but being serviced by a
machine. This means the system lacks a two-way communication, thus restricting
users from making any changes.

On the contrary, in case of a financial advisor, you are talking to a living being, who
will listen to you about your needs, your goals, and present financial status. Based
on the conversation, the advisor will create a suitable plan for you, which if you do
not agree with, can be changed.

#2 Real-Time, Face-To-Face Advice Is the Best Advice

It’s always a good and secure feeling to listen to another human voice and have a
face-to-face conversation with someone, rather than having to deal with a lifeless
machine.

When you ask for online recommendations for your investments, the suggestions are
usually coming from a computerised platform, trained to deal with your queries.
However, this is not enough. It’s only natural to have trust issues with a machine
handling your money matters for you.

Furthermore, it is an undeniable fact that financial advisors have more knowledge on
investments based on their experience in the field. You can have a real conversation
with them, asking question after question till you are satisfied with the answers. You
cannot do the same with online recommendations.

You also have tax deductions to take care of, which requires the recommendations
of an expert dealing with such matters for years. Websites can never estimate the
life changes that might occur unless a user feeds new data into it. In the same way, it
cannot get around the complex calculations of tax reporting, which can greatly affect
your financial decision in the long-run.

#3 Variety of Options

When you opt for online recommendations, the investment options in the results are
limited. This means that you can only opt for what lies in front of your eyes.

Representational image.
Representational image. Pixabay

If you are choosing a term policy, you would like to be judged on more than just a
few questions that you see on your screen and reap maximum life benefits from it.
You would like to know what riders are available along with the term policy, different
types of plans and benefits of the same. You can get all these answers when you
talk to an insurance provider, rather than an online recommendation system.

Furthermore, there are certain conditions that you may have doubts about, especially
pertaining to life policies wherein a divorce or death could bring in changes to the
policy, which needs to be clarified with a real person.

Online recommendations are good to go as long as your investment deals with low-
risk goals like a short-term investment or calculating your home loan or insurance
premium. For long-term goals like investment for the education of your children or
retirement, this tool only creates high risk.

Final Takeaway:

The final word is that online recommendation systems might be standing their
ground in the world of investment, but when you are not sure which direction to move
towards, financial advisors are your saviours.

A certified financial advisor adept with knowledge of your financial situation will prove
to be more proactive in aligning your investments.

Financial advisors, unlike online recommendations, can assist you in figuring out
whether you are on track with your savings and how other investment options can
benefit you in future.

Next Story

Reasons For Bigger Houses In America

Here's why houses are getting bigger in America

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Houses
Americans prefer houses that have big and open spaces in them. Pixabay

BY DORA MEKOUAR

Americans have long been drawn to big, open spaces, so perhaps it’s no surprise that houses built in the United States are among the most expansive on the planet.

And they keep getting bigger.

The size of the average house has more than doubled since the 1950s. In 2019, the average size of a new single-family home was 240 square meters (2,584 square feet), according to the National Association of Homebuilders.

Deeply held feelings about one’s home may be rooted in America’s homesteading, pioneering past.

“The appeal of the house for Americans, going back into the 20th century, was that it signified autonomy. You know, every home is a castle,” says Louis Hyman, an economic historian and assistant professor at Cornell University. “So, it has these echoes of signifying independence and achievement.”

The federal government has pushed the idea that a nation of homeowners is ideal.

The 1934 establishment of the Federal Housing Administration revolutionized home ownership. By creating the financial mortgaging system that Americans still use today, the FHA made home buying more accessible for millions of people. At the time, most Americans rented. Homeownership stood at 40% in 1934. By 2001, the figure had risen to 68%.

In the 1940s, President Franklin D. Roosevelt equated homeownership with citizenship, saying that a “nation of homeowners, of people who own a real share in their own land, is unconquerable.”

Today, the homeownership rate in the United States stands at around 65%.

Houses
The average newly built house is now twice as big as the average new home in 1945. Pixabay

The ability to invest in their homes has helped mask economic stagnation for many Americans. Although unemployment is near a record low, real wages — the number of goods and services that can be bought with money earned — haven’t budged in decades for U.S. workers.

“As Americans find that their wages are stagnating after the 1970s, they’re able to make money by investing in houses,” Hyman says. “The houses become a way for average Americans to get financial leverage, which can multiply their returns. There’s no other way for Americans to get access to financial leverage outside of houses. You can’t do it in the stock market if you’re just a normal person, and so this is a way to basically speculate in housing.”

For some Americans, owning a big home is a status symbol, physical proof that they’ve succeeded in life.

“This kind of classical example of the big suburban home has been a very powerful idea for many, many decades now,” says architectural historian William Richards. “People sometimes want specific rooms that have specific functions —a mud room; everybody gets their own bedroom; there’s no bunking up; a dedicated laundry room.”

And spacious houses are more financially attainable than they used to be.

Houses
For many Americans, a large home is not only a status symbol, but also an investment. Pixabay

“In the design and construction, there are greater efficiencies now for all sorts of reasons so that it’s less expensive to build a bigger house now,” Richards says.

But do bigger houses, sometimes called McMansions, make people happier? Not according to a recent paper that Clément Bellet, now an adjunct professor at INSEAD, a European business school, wrote as a postdoctoral fellow.

“Despite a major upscaling of single-family houses since 1980, house satisfaction has remained steady in American suburbs,” Bellet writes in the report.

Also Read- Usage of Anti-Inflammatory Drugs to Curb Symptoms of Depression, still Controversial

People living in larger houses, however, do tend to be more satisfied with their property, according to Bellet, but that satisfaction plunges when even more massive houses are built nearby. (VOA)