Proponents of the efficient market hypothesis believe that passive index funds are the best option, and that trying to pick stocks is a mug’s game which is doomed to fail. It’s becoming increasingly hard for fund managers to prove that they can beat the market. Because of the advent of robo-advisories, lots of people believe that the edge which fund managers used to have because of their expertise, experience, and intuition has disappeared. However, there is still a place for an intelligent investor, and rather than think of algorithms and human intuition as being competitive, we need to view them as being complementary. Each of these has their own place because they have their own strengths and limitations. It’s possible to encode the domain expertise into algorithms, which can be used as a screen to filter the universe of potential stocks they should be looking at. This has been done in other sectors (such as medicine), and there’s no reason why it can’t be done for investing as well. The algorithm would help investors to make sure that they are not overlooking companies which fit their predefined criteria. The algorithms will not make decisions – they will just provide suggestions. It’s the human investor who then needs to pull the final trigger. This new approach would be used as an intelligent investment decision support tool, which investors can use to help them perform better.

(Inc42)