Why use AI for investment?
Artificial Intelligence or AI is the program that has been developed and written to be good in analyzing, thinks, planning, and making decisions by processing its big database. Moreover, AI can apply its processed result according to each situation such as Chatbot that can respond to customers about products and services.
AI may not a far issue from us because AI can replace many repetitive jobs whether driving, accounting, finance, investment, and leasing. Also, AI is already in a complicated job such as the Financial Technology industry, also known as Fintech, whether loan, insurance, debt collecting, and investment. So, you need to develop your skills and adaptability in order to utilize the fully-function of the AI.
AI and Investment
We may familiar with AI in the manufacturing industries, but AI is already in many other businesses especially investing advisors. For example, Robo Advisor who is the Fintech technology advisor to general investors for online investment. This Robo Advisor helps suggesting about wealth management, investment management, financial advisor, and financial planning. It is easier for investors to invest and reduce management costs.
AI has been introduced to investment because of human weakness, “Personal feeling” which is emotional over logical thinking that affects and clouds their judgment and analysis. Moreover, most humans do not like spending time on repetitive jobs and have many responsibilities. Sometimes they are distracted by those and make an investment mistake. (Do nothing is also counted as a mistake.)
Now, many asset management companies also use AI technology for Algorithmic Trading and to support general investors. This AI development from many asset companies focuses on human investment compensation and covers all aspects such as the impact of market conditions analysis, selecting an asset, weighing investment ratio, making decisions and managing appropriate working capital based on an investor risk analysis result which makes AI investment judge as a system and works effectively without personal feeling.
However, there is a limitation for AI which is it cannot give any specific advice such as tax suggestions or prioritize the money target whether saving or paying debt first. Also, there are other concerning things which are data security and technology risk management. Since there was once a messy British market that occurred from a massive selling index by the robot after Brexit situation. This made the global market went crazy and it was not usually based on another basis. Due normally the short-term market is changed in-pattern based on many data both predictable information such as sales, benefit, economic growth, and unpredictable information whether politics, terrorists, natural disasters. These are the unpatterned factor that AI cannot learn and correctly analyses. This is an AI limitation for index market investment which is different from other industries whether medical, retail, or logistics that has a better pattern of occurring and easier for AI to predict and work correctly.
Apart from investing in Robo Advisor or Robo Trading as mentioned above, there are other interesting investments that are investing in a mutual fund with AI analysis. To find a higher long-term return investment, AI will help analyses by scoring all basic factors that affect the price such as valuation, growth, quality, sentiment, and risks, and adjust each factor according to a market situation to get proper investing ratio regarding your risk acceptable level.
No matter what your investment type is, before investing you should ask yourself what is the purpose of this investment? If you feel that your current investment has a blind spot and it needs to be fixed, then AI maybe your support such as to monitor the market, analyses and find the right index, or send a buy and sell order instead of you. This helps you reduce your personal feeling and no need to spend all day in front of the monitor. However, if your current investment is already effective, it is not necessary to try these robots. Anyhow, AI is a piece of important information that everyone should know. In this technology era, most of our daily life is driven by automatic system even in investment. Therefore, we must change ourselves to be ready for whatever comes and utilize every technology to the fullest.
Nipapun Poonsateansup CFP®
Independent Finance Planner and Public Speaker