In theory, such systems seem a great idea – establish your objectives, put them in a computer and sit back and wait for ‘the brain’ to tell you what to trade. If only life was so simple!

If it were that easy, the people who sell these systems would not be selling them but using them and retiring to live on their multi-million pound yachts after a couple of years. This reminds me of the seminar companies that started appearing a couple of years ago on the back of the house price boom, apparently claiming that they had discovered fail-safe ways of making millions from residential property. They subsequently found themselves under investigation by the Financial Services Authority.

If you are a knowledgeable enough investor and you have the time to monitor and actively manage your portfolio, a clear system of running the winners, top-slicing your profits and cutting the losers, as outlined above, would serve you well. The problem is when you are untrained and do not have the time to monitor your assets closely. In this case, I would urge caution.

Systems of the type you refer to are gradually becoming more widespread with financial planners, who normally recommend collective investment funds. They can be useful to
them in managing clients’ holdings and help them to make recommendations with regard
to altering fund choices. They generally add 0.5 per cent a year to the cost of one’s holding. This can be a value-for-money cost that is worth bearing.