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Is there any link between Investment Managing and Programming?

Could you use computer programs to create models that enable you to make decisions on what to invest money in ? technology programming investment-management

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Kregg’s Answer

Hi Alisha,


Great question! You can absolutely make a connection between programming and investment management decision-making. It's been in place since computers were first placed in the hands of the public. In fact, the connection is very commonplace in this industry.


For example, today, the term Robo advisor is being used on a regular basis. This is where an individual ("the client") would input their personal financial info into a website (e.g. Charles Schwab) and the website would use "intelligent" programming to determine the best mix of investments for that individual. Once the money is invested for the client, the system automatically makes adjustments to the client's portfolio reinvests the clients' funds without much, if any, further input from the client. The term "robo advisor" is used because everyone used to rely on real live human investment advisors to invest their money for them. This is still how the majority of clients' funds are invested. However, the automated or robot part is beginning to pick of steam in a big way.


Another example is the much more sophisticated "proprietary trading" shop that invests their own (or very wealthy clients') money in using lightning-fast, sophisticated programs written by smart individuals whom they have hired for that purpose (could be you!). These programs take advantage of very small movements in the prices of the security or securities for which they were programmed to trade in order to make a profit. The nickname for these organizations is "prop shops"- that's short for proprietary trading shops. The securities they trade can include currencies of various countries, stocks, bonds, or any of a wide variety of other securities. I did some consulting for one of these shops. The atmosphere is generally very calm with the computers quietly and quickly trading millions of dollars every day...all with very little human input.


Learning to code or program, in my opinion, is one of the most valuable skills anyone could possibly have. I highly recommend giving it a try if you haven't started already!


Hope this helps and good luck!!!


All the best,


Kregg


Schwab's Robo Advisor https://intelligent.schwab.com/public/intelligent/home.html
Prop Trading https://en.wikipedia.org/wiki/Proprietary_trading
Coding or programming https://www.codecademy.com/

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Jeff’s Answer

Yes. And it happens all the time. Among the more simple programs someone could create would be an index model. From there, people often try to use their models to try to outperform a passive index strategy. You might sometimes hear people refer to those that use programming to make investment decisions as algorithmic investors (or "algos"), quantitative investors, statistical investors, or black boxes. Google these terms and you should be able to find examples of these firms and learn more about them. You can find companies offering mutual funds, ETFs, and hedge funds that use computer programs to make investment decisions. Some do not offer any products based on their models and instead just use it to manage their own money.

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Stephen’s Answer

Hello Alisha,


Kregg gave a great answer. Here are two more of the top tier quantitative trading companies:
Renaissance Technologies - started by Jim Simons, a math professor, manages about $65 billion.
https://en.wikipedia.org/wiki/Renaissance_Technologies


D. E. Shaw - manages about $40 billion. This is where Jeff Bezos, who founded Amazon, worked.
https://www.deshaw.com/WhoWeAre.shtml

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Keith’s Answer

The better question should be, "Is there an investment manager that doesn't have utilize a coder or programmer?" Most larger firms have quantitative teams, that are highly technical (VBA, SQL and SAS, etc.). I can't think of many scenarios where having programming skills could work against you as a manager.
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