Listen to this articleBelow is our recent interview with Nissim Amar, CEO of Cherries Portfolio Builder:
Q: Can you give us a short introduction to TFI?
A: Since 2009, TFI Ltd., Takin Financial Instruments, has offered financial tools developed by experts in applied mathematics, programming, and artificial intelligence. Our vision is to create software that meets market requirements and market needs in innovative ways. Our primary product is Cherries – an online platform for the construction and analysis of optimal stock portfolios. TFI’s other systems include Tesuot and the TFI System – software solutions specializing in the management and advanced analysis of investment arrays. TFI has developed revolutionary algorithmic solutions to accurately measure the contribution of each asset in a portfolio as well as overall portfolio performance.
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Q: Why makes Cherries unique?
A: The prevailing attitude is still that the quality of a stock portfolio derives from the quality of its individual components. In other words, if each stock is high-performing, the portfolio is high-quality. Our approach shows that this is false. A portfolio consisting of high-risk assets can still perform very well and far exceed the performance of each individual stock. Likewise, a portfolio consisting of high-performing stocks can crash completely if they all come from the same sector.
That’s why Cherries doesn’t ask the investor “Which stocks do you like?” but rather “What level of risk are you willing to absorb?” This lets Cherries find the combination of stocks with the best possible risk/reward ratio that also complies with the user’s risk appetite, regardless of the size of the investment. The result is a portfolio that functions more like a network of stocks than a list of unrelated companies. Each stock in the portfolio has a balanced relationship with each of the other stocks.
Q: Why is now the time for a technology solution like Cherries?
A: The financial breakdown of 2008 eroded public trust in financial institutions, investment houses, financial consultants and analysts, and in the stock market as a whole. People are more open to exploring ways of managing and monitoring their investments independently. And Cherries facilitates that.
Cherries requires absolutely no prior knowledge or expertise and it has no preconceptions, technical or professional. It doesn’t rely on human analysis or short-term trends. It uses a powerful analysis engine to conduct hundreds of thousands of integrated calculations at record speeds. Users don’t have to wonder about any vested interest – our business model is based on subscriptions to the platform and Cherries does not make any money off of the portfolios themselves.
Q: Are Cherries stock portfolios really optimal? What’s the catch?
A: Cherries’ algorithms are partially based on MPT – Modern Portfolio Theory. According to MPT, an “optimal” portfolio is one that has the best ratio of risk vs return, given the investor’s preferences. MPT offers a way to maximize returns while minimizing risk through careful selection of the assets within a portfolio. According to MPT, up to a certain point, investors can raise the yields of existing portfolios without raising the risk levels or they can lower the risk level without decreasing yields.
Cherries creates many combinations of assets for every possible risk level. It then calculates the yield for each of these prospective portfolios and finds the portfolios with the best possible risk/return ratios. The user is offered a range of portfolios and chooses the one at the risk level that he or she prefers. This is the one that complies with user preferences about risk and a number of other factors while still maintaining optimal yields. These portfolios aren’t invincible and aren’t a way to get rich quick but, yes, they are optimal.
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Q: What can we expect from your company in the future?
A: Currently, Cherries’ database includes all of the major US exchanges and we intend to add data from up to 22 additional exchanges in the near future. We also plan to add a number of new features, including analysis tools for existing portfolios and portfolio management tools, as well as more advanced tools for pros, such as ETF construction. We’re continuously perfecting and adding to the features available on Cherries to make the platform more convenient, and more profitable, for investors with all backgrounds and investment levels.
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