Composer: Evolution or Revolution

We believe Composer is the next step in the democratization of investing.

The creation of the index fund, rise of online trading, and wealth of financial information available online have enabled retail investors to take the reins of their assets and manage them better and cheaper than the pros. Power is shifting to the people.

Composer is pushing this movement forward.

Composer allows retail investors to create their own strategies from building blocks using a no-code visual editor — and automatically executes trades on their behalf. Called “symphonies,” these strategies capture inputs and market data and make trades based upon those signals. Symphonies can be as sophisticated as “risk on / off” trades determined by market volatility or as simple as automatically rebalancing a 60/40 portfolio back to target weights.

A revolution

Exchange Traded Funds (ETFs) give investors access to entire markets and charge only a few basis points. For example, buying the Vanguard Total Stock Market ETF, which has a management fee of 0.03%, provides exposure to 4,000+ U.S. stocks while buying iShares Core U.S. Aggregate Bond ETF (0.04% management fee) provides exposure to the entire U.S. bond market. These passive ETFs capture the risk and return profile of an intended market, which investors often refer to as beta [1].

We believe Composer is a game changer because retail investors can now dynamically combine these betas to create strategies that were previously only accessible through professional investors. With Composer’s powerful backtesting tool and portfolio analytics, investors can experiment and iterate to build uncorrelated return streams and improve portfolio diversification. Look out, hedge funds. The next gate has fallen on Wall Street and the people are storming the castle.

Investing with Composer

How should investors think about adding symphonies to their portfolio? Think of a symphony as a discrete fund where you are the investment manager. Fully customizable, symphonies can be tailored to meet your unique circumstances and support important goals such as retirement, wealth preservation, and that convertible you’ve always wanted. The only management fees you pay are for the underlying funds and the bid-ask spread on trades. You can combine multiple strategies into a complete portfolio or build a single hedge fund-like strategy to complement your existing investments.

Investors can start with an existing symphony and customize it to their needs or they can build one from scratch (check out strategies here). And, by allocating a portion of their portfolio to a symphony not perfectly correlated with other holdings, investors can improve diversification, reduce drawdowns, and decrease portfolio volatility.  

Once a symphony is built, investors can put their money to work. Composer automatically handles gathering market data, running the strategy, and making trades with our brokerage partner. All of the underlying assets sit safely in the brokerage account and investors can see how much is invested in each symphony and underlying ETF and stock.

What sets Composer apart?

First, our no-code platform is easy to use and fun. Assets, weights, conditions, filters, and groups can be infinitely combined and strategies can be instantly backtested. Investors can iterate quickly, evaluating Sharpe ratios and volatility to find combinations that deliver risk and return profiles that meet their needs.

Second, symphonies are completely customizable. Maybe you work at Apple, and want to reduce your risks relative to the U.S. tech sector. That’s because as an investor in a simple market-cap weighted index fund or ETF your job security, bonus, and equity investments are correlated with the technology sector. At Composer you can combine sector ETFs, to create a U.S. market-cap weighted portfolio with a static underweight to tech - and that position will automatically rebalance based on market performance. No spreadsheets to track positions or rebalance reminders required.  

The tech sector represents ~30% of the Russell 1000 Index. This symphony halves the exposure to 15% and allocates the remainder of the position among the other 10 sectors in the index.

Lastly, employing a robust process and maintaining discipline are key tenets for successful investing. As investors, our humanity can be our own worst enemy. In addition to the myriad of behavioral and cognitive biases we are susceptible to, money is emotional. As markets crater we see our dreams disappearing with our shrinking balances. It can be tempting to flee to safety, sell out of the market, and get off the roller-coaster.

Unfortunately, timing the market is difficult (read: almost impossible) and investors that abandon their long-term plan often destroy value. Vanguard, the mutual fund giant, estimates that avoiding emotional decisions amid market turmoil and chasing “hot” investments could improve returns 1-2% for investors.

Composer explicitly builds the rules and processes into your strategy. Investors, with cooler heads, determine the assets, trading rules, rebalance frequency, and weights for their strategy. The symphony automatically trades based on those criteria helping investors avoid behavioral biases and convoluted investment theses.

Join Us

Come join a community of investors that is pushing the boundaries of investment management. Build, test, iterate, and share your strategies with friends.

Head to composer.trade to see what strategies are out there and to create your own.

*Please see important disclosures related to the use of this investment analysis tool