Though artificial intelligence (AI) has been around for decades, it has made significant advances in the past year. These improvements have made it possible for people to use AI in instances that they hadn’t considered before. It has been particularly helpful in science and medicine, but some financial experts have also been assessing how the technology might work in this space. What they’ve found might be exactly what you need for your investment journey.
When AI Might Be Your Investment Friend
While a lot of people haven’t fully embraced AI when it comes to their finances, the financial experts are another matter. As soon as the technology advanced, many of them ventured into the world of artificial intelligence to see how the powerful tool could help them with their daily activities. They’re enjoying the most impressive characteristic of AI: its ability to analyze a ton of data in record time.
Making the best financial decisions typically involves examining various metrics informed by historical data. If investors are doing this on their own, it can take a lot of time, and the odds of an error can increase with each added data point. When it comes to such sensitive data, just one missing decimal point can throw everything off.
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That’s where AI can help. Using the technology, analysts and investors can ask it to analyze long-term data that can be used to make decisions about trades, investments, and portfolio diversity. Additionally, some analysts suggest that AI can be used to predict which stocks to invest in within a limited window. That means AI may be able to tell you how a company’s stocks may perform within the next few months, but not a year or farther. Still, the experts suggest caution in doing that.
The experts also stress that there are a few risks when using AI for investing currently. Interestingly, despite being great at analysis and determining trends, AI can be notoriously bad at math. To combat that, you have to be careful that you’re using a model that can effectively implement the level of analysis you’re looking for without needing complex mathematical formulae.
Another problem that you may encounter with AI is its data source. As you might expect, feeding the AI biased data will only give you information that leans towards what it has been given. If you feed it data that supports an opposing view, then the AI will supply you with an analysis that leans in that direction, too. The best way around that is to ensure that you’re giving the AI objective and comprehensive data to work with.
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For example, analyzing shares to invest may include looking at the company’s growth over a year, its profits, changes in dividends, and market share, among other factors that you might not think of, like changes in its energy usage. The aim would be to choose data points that will be important to making a well-informed decision.
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How to Choose AI Investment Apps
AI investment apps are a great way to get started because you’re not left alone to decipher what information needs to be fed into the machine. Usually, these apps use specific models that have been trained on what data they need to analyze. They also offer the option to be personalized for their users. If you’ve spoken with an investment broker before, you may be familiar with the term ‘risk tolerance’. If not, the term denotes how much risk you’re willing to take with your investments. With this in mind, the app might not suggest certain stocks to you if they’re past your risk threshold.
Since there are several AI investment apps, though, how do you know which one to choose? Well, the first thing you should think about is how the financial experts rate the app. It’s good to look for apps that have high ratings to begin with. The next factor that can help is how much data the app uses to make its analysis. The data points the app uses should be relevant and up to date.
You’ll also want to see if the app communicates what you most want to know. Some apps will use the data to give you a list of stocks that are doing well based on a simplified rating. Others offer more information so you can make that decision, if you desire. Depending on what you want, certain apps will notify you when metrics like a share price hitting a particular point happen, so you can move accordingly.
An app’s ease of use is something that will matter to anyone, regardless of their financial knowledge. You should be able to navigate the app easily without being burdened with financial jargon. Additionally, apps that allow you to incorporate your investment account can be helpful. In that way, you can act quickly if you want to buy or sell shares based on the app’s information.
Finally, a trading simulator might be a helpful learning tool as you try out what the AI investment app is telling you. It’s a good way to assess your readiness to use an app without losing any money on the stock market.
When to Leave it to the Professionals
As great as AI may be, it’s far from foolproof. As mentioned previously, math isn’t AI’s best friend, so it can make some mistakes. If you don’t know what to look out for, you may not notice that an error has occurred and end up making the wrong decision. To make things worse, if you’re a complete beginner where investments are concerned, you might not know what data to feed into the AI in the first place. Companies produce a lot of data, but not all of it will be relevant to an investment decision. Yes, investment apps can bridge that gap, but even then, you have to vet what data the apps say they’re using for their analysis.
Even with some great AI investment apps available, there are limitations. Some of them work best for people who already have an idea about how to invest and simply need a tool that makes their current trading more seamless. Sometimes, you need not only to have existing financial knowledge, but you also have to be familiar with different aspects of AI to truly make things work.
Finally, some aspects of investing aren’t just about numbers. For example, one factor that can affect how well a company’s shares will do is an impending new product. If there’s no numerical data or historical trends to attach to it, a complete analysis might not be possible. However, a professional can use the knowledge to supplement what the AI supplies.
If you’re not sure where to begin, find the potential learning curve overwhelming, or you simply don’t have the time to learn everything that will help to accomplish your investment goals, it’s a good idea to seek out a financial expert. They can help you get started on your journey regardless of what you need. Of course, if you change your mind in the future, there’s always time to use AI to invest. Given how it’s evolving, the risks won’t remain the same for long.
AI is currently an impressive tool in several landscapes. For investments, it has the potential to be useful for those who have some financial knowledge as well as those who are already experts in the field. If you’re not comfortable with what’s required, though, you may be better off talking to an expert first.
