Much has been made of artificial intelligence (AI) and its ramifications. From chatbots and virtual assistants to automation and robotics, the developing technology has many applications. The world of investment is no exception. Whether it be choosing what kind of investment route to pursue, managing an investment portfolio, risk management or diversification of assets, the application of AI to different aspects of investing is already having an impact on the field. Here is an overview of five uses of AI in investing:
Automated investing and algorithmic trading. Automated investing relies on algorithms to make the right decisions in regard to investments. Investment and wealth managers have used some form of automated investing since the beginning of the 21st century, but improvements in the technology have made it more accessible to clients without having to use wealth managers. Stand-alone robo-advisors such as Wealthfront and Betterment have been joined by platforms connected to traditional investment platforms, such as Charles Schwab Intelligent Portfolios and SoFi Invest. Automated investing benefits from applying machine learning and real-time analysis of big data sets to identify good trading opportunities and manage portfolios.
Risk Management. Identifying and mitigating risk is integral for successful investments. Recognising potential losses or uncertainty in an investment helps both private investors and portfolio managers make important decisions on how, when and where to invest. Risk managers can use AI to spot patterns and trends in data that other analytical tools may not. This includes identifying potential volatile stocks and shifts in investment trends. In addition, investors can use AI to automate repetitive tasks to avoid costly errors, as well as analyse data from previous investments so as to learn from mistakes in the past.
Artificial intelligence is not a replacement for human instincts, ingenuity and insights. It can certainly be a useful tool for individuals and organisations to maximise the potential of their investment portfolio. As the technology continues to evolve, new ways of applying AI to investment management can transform the field, removing barriers to access, improve profitability and boost confidence.
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