Investment Shastra
MoneyWorks4me is built for decision making unlike Algo-based sites

MoneyWorks4me is built for decision making unlike Algo-based sites

Moneyworks4me is built to enable serious investment decisions, unlike algo-based sites.

This article covers the following:

  1. How has this made Moneyworks4me different?
  2. Do rigorous valuation for the Top Companies and not use Algo-driven models for this.
  3. But what about investing in mid and small-cap stocks beyond 200?

MoneyWorks4me enables retail investors to take decisions about money that is a substantial portion of their surplus. Not the can-lose-money with which people speculate and not the let-me-dabble-and-see-how-it-goes money.

It’s money that people take seriously because their financial security and ability to fulfill their responsibilities and meet personal goals depends on it.

How has this made Moneyworks4me different?

Enable decision making and not providing loads of data. What data to provide and how to represent it is driven by whether it helps investors take decisions.

So we chose to provide a set of data that is necessary and together sufficient to take a decision.

This prevents us from being tempted to show more and more data on our site (maybe we lose some organic traffic) because data overload is a big problem that hinders decision taking.

However, there are no compromises eg. we show data over 10 years to cover periods of economic growth and downturn but we colour-code it so you can interpret this very easily.

We also complement data with an Analyst note which provides a view beyond numbers.

Decide on Fundamentals for Long term investing. There is a big temptation to present technical analysis and a view of the short-term performance along with the Fundamental analysis and claim its superiority.

However, this is not true and one is likely to get confusing and contradictory signals from these leading to wrong decisions.

Investments based on fundamentals rely on assessing the fair value and anchoring to that.

At MoneyWorks4me, we look for triggers in the company’s performance rather than technical which depends on stocks price movement (we have tried this and it doesn’t work).

For example, if new capacities are likely to increase production, revenues and profits then we have a trigger for buying.

Do rigorous valuation for the Top Companies and not use Algo-driven models for this. 

The biggest investments for retail investors happen and should happen in the best large, top companies at a reasonable price if not at an attractive discount.

This requires getting as good an estimate of these companies as fair value as possible. There are sites that use algos (based on a statistical analysis of the stocks price history) to determine the fair value of stocks, attractive buy and sell price.

If this was effective, there would be no need for fundamental analysis and whiz kids and the computers would have been the wealthiest people by now.

The problem with algo-based valuations is that they throw up a wide range of outcomes. The range tends to be wider when the stock’s prices in the past have been more volatile.

When we tried our hand at algorithms, we had found the valuation of companies had varied outcomes.

A company with a fair value of 100 showed a valuation range of 50-350. We have seen this happening with another website that following algo methodology (you too can find this by checking 10 to 20 stocks). Now that’s too large a range to make a decision to invest.

One may expect human error rate of 10-20% around their estimated value; but since algorithm work on past volatility (without paying heed to exceptions), it throws up a very arbitrary range of outcome.

While algorithms can be used as a quick-low-effort input it does not provide a conviction to invest.

Businessmen don’t use ‘algorithm’ to take expansion or acquisition decisions they analyze hard numbers themselves.

But what about investing in mid and small cap stocks beyond 200?

We recommend using the Mutual fund route to invest in these stocks. Algo-based valuations of stocks beyond 200 are likely to give an even wider range making it very difficult and risky to take decisions based on it.


Algo based websites

Analysis Fundamental; qualitative and quantitative research, involves studies of business and management. Based on past volatility, set formulas don’t account for a change in the economic environment, business strategy, etc.
Information Filtered information for quick decisions highlights risks and key points. A lot of information at disposal. Hard to pick what’s relevant. Reduces productivity and adds to the confusion.
Technical Analysis with fundamental Focuses on long term fundamental trends, ignores short term moves that may not be permanent in nature. Focus on short term loss aversion and small profits, less critical for long term investments.
Tracking valuations Fair value-MRP and Discounted

Price is visible in real-time since the start of valuations eg. since 2011. Very useful to both analyst and investors

Usually not tracked or not made visible. Even if tracked it does not aid decision making

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Raymond Moses - Founder, MoneyWorks4me

Founder- Moneyworks4me, has over 36 years of experience. After graduating from IIT Kanpur in 1983, he worked with Hindustan Unilever and Castrol. He is the Founding Director of The Alchemist's Ark-a business consulting, training and e-learning company with many market-leading companies as clients. Since starting Moneyworks4me in 2008, he has worked to make investing advice effective, transparent, simple and accessible to Retail Investors.