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There are a few main ways that AI is used but, essentially, AI programs are used to analyze market trends and help investors make informed decisions when investing in various stocks as well as other securities.
Definition of AI
With AI's emerging technology, you may be wondering exactly what it is and what it does? Well, AI stands forartificial intelligence, and refers to the way that machines mimic human intelligence. There are different ways that AI is used, but the most common is machine learning, meaning that computers are trained with data to make inferences and come up with information that would typically be done with human intelligence.
5 Different Artificial Intelligence Applications when it comes to Investing
Investing using AI is more complex than just one method. It also doesn't mean that you no longer need a financial advisor. These AI programs are used as tools for advisors to help average investors with real-time data and portfolio management. That said, here are 5 different ways to use AI with investing.
Algorithmic Trading
Using AI for this purpose speeds up the trading process. These are AI algorithms that are able to analyze large amounts of data in a short period of time. Even though human expertise is still able to follow market trends and patterns, the element of bias is eliminated using AI software and fundamental analysis. However, it's only one investment strategy that investors use, and nothing works all the time. There are specific instances where algorithmic trading works better than other strategies.
Sentiment Analysis
Sentiment can be a difficult thing to quantify. It involves not just looking into the market research, but also the feelings of investors as well. Searching things like news articles, social media posts, and different online content is a way that AI is used to track market sentiment.
This is an important thing to analyze when making investment decisions. Market sentiment often can influence the boom of different industries, helping to dictate market volatility.
Optimizing Your Investment Portfolio
As we mentioned earlier, portfolio management is key when it comes to investing. Having a good mix of investments can be key to earning an income as well as a way to reduce costs. Keep in mind also that when you invest, you don't just have to invest in the stock market. There are other securities available, such as ETFs (Exchange Traded Funds),
Using AI for this purpose can help to prioritize your investment portfolio as you choose. When you specify how you want your investments structured, AI helps with risk management, investment strategy trading and other things that get the most balanced profile to meet your needs.
Risk Management
The point of investing is to make more money, not lose it. This is where risk management comes in. AI can analyze historical data and anything else that will affect your investment decisions. It also uses machine learning techniques to reduce costs while being more efficient
While having human expertise can be beneficial when stock picking, stock trading, and other trade ideas, AI can be more efficient when it comes to the research portion of investing. It not only helps with risk management, though, but it can also help with risk tolerance.
Personal Investment Advice
When you are doing your own investments and building your own portfolio, the more advice you can get, the better. AI technology companies are recognizing this. Those who are experienced investor, or are new to the investment industry, are looking to make the most of their investment opportunities.
One artificial intelligence application that just recently launched is Magnifi. It functions as a trading platform, but it can also answer questions using a chat interface. With more advancements from data scientists emerging, things like proprietary algorithms, neural networks and natural language processing are only going to get more advanced. This means we should see more technology emerge for not only personal investment advice, but also investment purposes in general.
Best AI Investing Platform
When it comes to investing with AI, there are a few online investment management companies that offer machine learning algorithms and AI tools to assist with the investing process. These AI-driven brokerages cannot necessarily replace human advisors, but they assist with financial data to help predict investment outcomes.
Wealthsimple
You may not already know this, but a popular online brokerage that is known to incorporate AI is Wealthsimple. While it isn’t strictly AI-powered, they do leverage AI. In fact, right on their website, they state that they do use Artificial Intelligence (AI) services. They have ai systems for chatbots and AI voice agents. They also specify that while they focus on accuracy, they recommend you consult with investment professionals for advice.
While their AI investing bots can help with making informed investment decisions, any additional financial analysis and advice on trading strategies is strictly for information purposes. Investment professionals have a financial education that should be more heavily relied on
Questrade
As one of Canada’s leading trading platforms, Questrade offers many different AI tools on its site. They even use it internally to help build security solutions for their platform. They also have a new platform they’re working on called Questrade Pro. It contains AI analysis tools to help with investment decision-making. This AI strategy will include a variety of tools, including AI-powered stock screeners.
While this won’t directly affect the global economy and stock prices, retail investors and institutional investors find it an important tool in condensing financial reports, tracking market movements, and even monitoring asset location. While it can’t predict future events, it can track data points to help you reach your investment goals on your investment journey.
AI Invest
If you’re using an online platform that doesn’t use AI, thanks to the AI revolution, you can use third-party AI-powered platforms to analyze portfolio performance, earnings reports, and more. One of these AI models that’s great for all investors, including beginner investors, is AI Invest.
With AI Invest, you can sync all of your brokerage portfolios to gain a competitive edge. While human investors can contain a wealth of knowledge, this program offers real-time analysis of market conditions and can account for human oversight. Plus, AI’s ability to analyze potential investments using pre-programmed rules can be much more efficient.
With this program, you can use traditional algorithms and predictive models to help make investing decisions. However, the program does lack human intuition. While it can account for your risk appetite, this user-friendly interface isn’t to be solely relied upon. Even though incorporated AI is a powerful tool for investment activities and has transformative potential to influence day trading and investors’ goals, you should still do your due diligence.
Magnifi
Since AI’s become an emerging theme, there are vast amounts of low-cost options available that have large language models. They use different data sources and your risk profile to help you make smart investing decisions. A really popular one that a lot of investors use is Magnifi.
Magnifi focuses on using AI to help you get better financial outcomes by providing 24/7 guidance as well as smarter investment strategies. You can ask it questions, have it analyze data, and find information regarding the current market conditions. You can even track all of your investments in one place.
Another great thing about Magnifi is that it provides real-time insight into any and all investment options. In fact, the key features of this site include:
- Commission-free trading
- Custom-built portfolios
- Unlimited AI assistant chats
- Real-time analysis
- Natural language searches
- Central account tracking
Plus, the fees to use this service are pretty low. You can pay either $14 per month or $132 per year. Both of these include the same features; however, the annual fee is 20% cheaper.
Best AI Investing App for Beginners
When it comes to AI investing apps for beginners, the robo-advisor apps are the most recommended. In Canada, this is Wealthsimple and Questrade. The reason is that these apps aren’t completely AI-run, they just have AI components. This gives you the best of both worlds, meaning you get AI programming as well as human advice. Since AI isn’t foolproof, this can help bridge the gap between AI information and human intuition.
Best AI for Investing
When it comes to AI for investing, there are essentially two different types. There are Robo-Advisors and AI-Enabled Brokerage Platforms. Both of these have their benefits. However, what suits you best depends on how experienced you are at investing.
Robo-Advisors
Robo-advisors are a really cool feature that are used by some of the top online brokerage firms. They’re essentially algorithms that are used to create diversified portfolios. These then continually manage the portfolios. They also create and manage these portfolios based on your risk tolerance.
While these programs aren’t fully AI-driven, they do have minimal human interaction. In order to create your perfect portfolio, they use an online questionnaire to set you up with the portfolio that works best for you. It will then automatically invest your funds for you. The best part is that these portfolios are also low-cost.
AI-Enabled Brokerage Platforms
AI-enabled brokerage platforms work differently from robo-advisors. For one, they use machine learning as well as natural language processing. They collect the data, analyze it, predict, strategize, develop a plan and then execute it. Essentially, they provide the insight of a broker but do it in a matter of seconds. However, there is no human insight involved with this process at all.
The system will continue to analyze and manage all of your portfolio. Due to this, though, there is some risk because investments don’t change solely based on data. This type of AI is missing the human aspect, so it should be only used as a tool, not as a replacement for traditional investing.
Risks Associated with AI Investing
Now that AI is the future, more people than ever are using it in their everyday lives, including investing. However, without accounting for the human element of things, AI isn’t 100% reliable. This is why it’s really risky to strictly rely on AI’s opinion. While it’s insight can be really beneficial in your investing journey, it isn’t the only option out there. It’s best to use it in conjunction with other investment tools out there. This is likely to get you the best investment outcome.
How AI Can Benefit Investing
When it comes to AI and investing, there are a few different ways that it can make a large difference. Let’s take a look.
Accessing Market Information
There is so much information out there regarding investments and their history. AI can access this information 24/7 and take out the key points that you need to know. It can even provide you with relevant real-time data as it occurs. The fact of the matter is that AI can access information faster and more efficiently than humans.
Analyzing Data
One of the most time-consuming things you can do as an investor is analyze data. AI can analyze an impressive amount of data in just seconds. It can also extract the relevant information from the relevant information, which can really improve the process of choosing the correct investment.
Recommending Investments
Many companies use AI to help recommend the most relevant investments for you. They can extract the data you need as well as the type of investments that you usually invest in, and make relevant recommendations from there. This can help you find investment opportunities you may never have considered before.
Providing Education
AI doesn’t just have to be used to provide you with the investment decisions you’re looking for; it can also provide you with the tools you need in order to make investment decisions for yourself. Since there is so much investing education out there, AI can narrow down what information you need to learn. It can also find information from various sources, which can help you learn things you may never have found before.
Is AI Investing Expected to Grow?
In short, the answer is yes. AI in the context of investing is becoming a widely used tool, and this just keeps growing. So far, it hasn’t replaced human involvement for investing, but what it has done is made gaining access to the information needed to make smart investment decisions easier. Many are happy to utilize these AI tools while recognizing that it isn’t a foolproof solution to making money.
Even though AI uses the most relevant information to make smart decisions, there are just things you can’t calculate, and AI will never be able to replace those. So while it continues to grow, there is likely to always be some sort of human involvement in the investing process. In fact, some of the best investors rely on their instincts as well as relevant market data to grow their clients' wealth.
Conclusion
When it comes to investing, we naturally think of hedge funds, the stock market and more advanced investments. There are plenty more investments out there. Many people don't realize they actually already have a form of investment when they open RRSPs, mutual funds and other similar retirement accounts. That said, with more AI technology emerging, it won't be surprising to see more and more Canadians entering the investment world.
