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This is a first: A robo-advisor that lets you invest like hedge fund.
Titan Invest is a mobile-only investing platform that allows you to use strategies that were once reserved only for the ultra-rich.
An ordinary investor can now invest for potentially higher returns.
Sounds too good to be true?
Maybe. It is a little bit too early to tell, find out why exactly and much more in this in-depth review.
What is Titan Invest?
Titan Invest is an investing app that allows anyone to invest like a world-class hedge fund. The company is hardly 2 years old but has already amassed over $58 million in assets under management.
They’re backed by Y Combinator and are now helping over 5,000 investors manage their wealth.
In the following review I’m going to show you Titan’s investment strategies, how a hedge fund works, the pros and cons and lots more.
What is a hedge fund?
The experienced investor can skip this one however let’s quickly look at how hedge funds work:
In a nutshell, a hedge fund is an investment aiming to grow your capital while protecting (“hedging”) it from market declines.
What it does, is protect portfolios from market uncertainty, while attempting to generate positive returns in both up and down markets.
They are designed to minimize risk and maximize profits.
Historically hedge funds have been shown to increase profits over the long term.
That is great, however please also keep in mind there are some downsides to this style of investing like limited liquidity and less control.
The majority of hedge funds require a minimum investment of $1 million. There are also more and more “cheaper” hedge funds, the lowest ones, however, start at $100,000.
That is too expensive for many, and that is where Titan Invest can be a great alternative.
Titan + hedge fund = ?
Titan Invest is not a hedge fund itself.
How it works is, it uses an algorithm that analyzes thousands of hedge fund filings and determines its core portfolio based on that analysis.
The core portfolio consists of 20 high-quality (long-term) investments. This includes stocks of giants like Apple, Visa, Microsoft, PayPal, Broadcom and Google.
Your portfolio has a personalized hedge. The level of ‘hedging’ will be determined by your risk-adversity. Upon opening an account you will choose between aggressive, moderate, and conservative.
The personalized hedge is fully-automated. Titan will adjust it according to a comparison of Titan’s performance vs. the S&P 500’s. (Basically, the hedging uses an Inverse S&P 500 ETF)
So if your portfolio is declining significantly for a certain period of time, Titan will move a greater amount of your capital into the hedge. and vice-versa.
What exactly does that mean?
- An aggressive approach will decrease your money invested in the hedge relative to the 20 stocks.
- A conservative approach will increase your money invested in the hedge relative to the 20 stocks.
The risk classes affect your portfolio in the following way:
When your portfolio is in a downturn*:
- Aggressive – 5% is hedged
- Moderate – 10% is hedged
- Conservative – 20% is hedged
When your portfolio is not in a downturn:
- Aggressive – 0% is hedged
- Moderate – 5% is hedged
- Conservative – 10% is hedged
*When is your portfolio in a downturn?
According to Titan, downturn is defined as
“when the Titan portfolio’s trailing 12-month return falls below the average cumulative return of the S&P 500 over the trailing 12 month period.”
The hedge is not a guarantee of not incurring any losses, it may help in mitigating potential losses when market volatility strikes.
By using the same strategies of these focused hedge funds, Titan Invest aims to outperform the overall market return in the long run.
If you want to learn more about different hedge fund strategies, check out this great article by Investopedia.
You can start with Titan Invest with the following accounts:
- Individual taxable accounts
- Traditional IRAs
- Roth IRAs
- Rollovers (existing IRAs, 401(k)s, and 403(b)s)
Fees and other costs
So far so good. But what are the fees and costs associated with this service?
Titan Invest charges a 1% annual advisory fee. This basically equals the cost of a traditional personal advisor.
That is quite a lot for an online investing platform.
However if the long term returns justify it, the advisory fee will be worth it. We shouldn´t only compare this service with other robo advisors but also with conventional hedge funds. Conventional hedge funds typically charge 2% management fees. On top of that, they can charge anywhere from 15% to 20% in performance fees.
Furthermore it should be noted that there are no hidden fees. You will not be charged trading fees, performance fees or electronic statement fees.
Other robo advisors mainly invest in ETFs. When investing in ETFs an expense ratio will be charged. That is another cost that you will not have with Titan Invest.
Moreover, all deposits and withdrawals are free.
Let´s be clear, 1% is a only a lot for a robo advisor, not for a hedgefund. Titan Invest is a hybrid in that regard. Apart from the 1% there are no other costs, it is pretty straightforward and you won´t have any surprises.
And it gets even better:
There is a discount of 0.25% on the annual fee for each personal referral. So if you manage to refer 4 new customers the fee will be 0.00%. If you manage to do that, investing with Titan becomes kind of a no-brainer.
It is a new company, they only launched roughly 2 years ago so they are trying to get as many clients on board as they can. The sooner you jump on the ship the better your earning potential.
Titan Invest Pros and Cons
According to Titan’s website, their philosophy is to invest in high quality businesses that can compound your capital at a high IRR (internal rate of return) over a 3-5 year time horizon.
As you can see in the following screenshot, to date they have actually managed to beat the S&P 500.
How to open an account
Getting started is easy. Just click “Join Now” on Titans website, you will then be asked to answer a series of questions regarding your investment goals, time horizon, and risk tolerance.
Upon providing some basic info like your name, date of birth, and social security, you’re all set to fund your account.
Deposits and Withdrawals
Your can access your money at anytime. Unlike other platforms or hedgefunds, there is no lockup.
As previously mentioned, there is there is no “minimum investment” however there is a minimum deposit of $100. Yea right…
It should also be noted, that there is withdrawal holding period of 5 days. This however is justified as it is not only to deter money laundering but also improves the risk management of Titan Invest.
New: Titan offers Instant Deposits, which lets you deposit money in no time. It is available for all users at no additional charge. Pretty cool, contrary to what you may believe, there are not many platforms that offer that service, especially for free.
Titan Invest with Other Apps
Using Turbo Tax Premium, consolidated 1099 forms can be uploaded into your Turbo Tax account come tax time. Another tax software that integrates with Titan is H&R Block’s.
Your trading activity can be downloaded through Apex (csv). Quicken is still not supported but most likely will be supported in the near future.
There are no current promotions however as mentioned earlier, there is something even better, something that can save your 1000s of dollars in the long run.
When you refer a friend who funds an account, Titan will give you a 0.25% discount on your management fee. So all it takes is referring four friends and Titan will waive your fee completely. The cool thing here is, that instead of running expensive ads, they actually give back to their customers.
Is Titan Invest worth it?
So far yes. However it is still impossible to make a true assessment as to how their performance will be in the long run. The management fee of 1% is definitely very high for an online investing platform. However if Titan continues to outperform the market with their hedge fund strategy, your investment may be well worth it. If you are interested in lower fees this article about free robo advisors may be helpful to you.
Why does Titan only invest in 20 Stocks?
Titan uses 20 stocks only which, according to them, was inspired by the advice of the great Burton Malkiel. In his famous book “A Random Walk Down Wall Street” it says
“By the time the portfolio contains close to 20 equal-sized and well-diversified issues, the total risk (standard deviation of returns) of the portfolio is reduced by 70 percent. Further increase in the number of holdings does not produce any significant further risk reduction.”
Is Titan Invest Safe?
Yes. All data is encrypted using SSL and a 256-bit encryption. (miltary standard) Like other robos, your money is insured up to $500,000. (SIPC) The custodian is Apex Clearing and that is where your assets are held.
Which risk tolerance can you recommend?
Risk tolerance is a decision that you have to make for yourself.
In general, the younger you are the more it can make sense to lean towards a more risky portfolio, on the other hand if you are already close to retirement, a more conservative approach would probably be beneficial.
Risk profiles can be adjusted once a quarter when Titan rebalances your portfolio. So even if you start out aggressive, you can still switch to moderate or conservative later.
Once you sign up, you will also have access to a collection of videos, articles, and in-depth reports tailored to the stocks in your particular portfolio.
The first thing that will come to mind is probably that 20 stocks doesn’t seem to be the most flexible investment choice.
However it’s still kind of flexible as your portfolio is spread evenly across these 20 stocks by means of fractional shares.
You also have the ability to change your risk-level every 3months.
Titan believes they can achieve higher returns with twenty high-quality stocks and a personalized hedge. Other robo advisors follow a strategy with a variety of ultra-diversified ETFs or mutual funds.
No strategy is necessarily better than the other, the factors involved are countless. Who will yield the better returns in the long run, remains to be seen.
Is Titan Invest Right For You?
The investment strategy is completely different, their fees are overall lower however they don´t attempt to beat the market, which is something that Titan does. More traditional robo advisors intend to imitate the market as best as they can.
If Titan Invest will beat the market in the long run remains to be seen. Until now, they have done so consistently.
The team of Titan Invest came up with a brilliant concept that has so far worked pretty well. They have however, not passed a true test yet, the company is barely 2 years into its launch and the following years will really tell if their strategy will yield long term results.
The hedge fund industry used to be notorious for having an incredibly high barrier to entry and high fees. Titan Invest has successfully managed to cut out the middleman and digitalized the service in a way that allows low overhead and therefore lower fees. They have made it easier for ordinary investors to get started for free.
Especially in a volatile market choosing a hedge fund-like investment can be a pretty smart move. 1% management fee is high for a robo advisor but it is also not fair to compare Titan to other low-fee ETF robo advisors. Please keep in mind that 1% is incredibly low for a hedge fund.
I hope you now know enough to make an educated decision about Titan Invest.
Overall, I really like the idea of a hedge fund-like robo advisor since it aims to compound your capital at an above-average rate of return over the long term I will personally give Titan Invest a shot.
Michael is a senior writer at The Robo Investor. He earned his master’s at the Craig Newmark School of Journalism at CUNY, and is currently taking CFP courses at the University of Scranton. He has been an avid finance enthusiast ever since he started investing at the age of 23. Meet the Team