Innovation | 02.22.22
How to Allow Investors to Play Speculative Bubbles—but Reduce the Risk of Losing a Lot of Money
Jonathan Shenkman, director of investments at Oppenheimer & Co., would like to see efforts to create products that will use behavioral psychology to protect investors from speculative bubbles. Such products would build on the work done on overcoming cognitive biases and procrastination in the area of retirement savings, like automatic enrollment and automatic escalation of contributions within 401(k) plans. "Specifically, I believe that automation could be used to manage speculative risk within an investor’s portfolio," says Shenkman. One potential behavior-focused innovation that could allow investors to participate in speculative bubbles while minimizing the potential for getting financially hurt is a one-fund solution, developed similar to a target date or lifestyle fund, with 95% of the investor's portfolio allotted into a prudent asset-allocation based on the investor's age or risk tolerance, while 5% is invested in the fads of the day.
Read the full article on Wall Street Journal