Artificial Intelligence is the new buzz in the technology world. There is no surprise that AI is leading the way in almost every industry it has adopted. As per the latest statistics, AI technology can increase business productivity by up to 40%. Companies and businesses with AI under their power will have more chances to stay ahead in the competition in many different ways in the coming years. It is not only about the companies, individuals who understand the power of AI will be better off – financially.
Though we hear and read about AI, the concept is not clear to most. When we talk about AI-based tools for investment, you must first understand AI technology. Only when you are sure of it, you can rely on it to invest your money. So let us find out how investment and AI work together.
The rising data
Have you ever wondered what trading and investing are about in terms of numbers? How and why do numbers change every second of exchanges?
Investing and trading in the market is about a series of reasoning based on the data. It is also about solving the problem of forecasting the direction of stock prices in the future. Earlier predicting the future movement was about technical and fundamental analysis. It was understandable, as earlier, that the amount of data was limited, and we could study all on our own. However, today we are generating a humongous amount of data. It is a food for technologies like Artificial Intelligence. The more data you provide to the system, the better it performs. For this reason, over the years, AI-based tools have become more efficient and accurate in making the right decisions.
AI helps you organize financial data
Today, the problem with information and knowledge is that it is vast – it won’t be wrong to say it is limitless. Also, it is not well-organized or well-formatted and changes as you read this article. As an investor, there is no way you can use the knowledge and information available in an efficient manner. AI helps you perceive knowledge better.
Stock market and AI
As an investor, you need to understand that AI is a set of hyper-intelligent techniques that understand the market and help you make data-driven investment decisions. Machine Learning and Artificial Intelligence focus on algorithms that help in data-driven decision-making, especially when things are much larger and you do not have time to study and analyze everything.
Traditional programming and ML – In traditional programming, a crucial variable is needed to make predictions. For example, whether a stock will outperform or not, and to figure that out, you need to go to an expert. In traditional programming, you get the data of all stocks and have criteria that need simple code or a simple excel filter. The outcome of this code is used to understand whether to buy the stock or not. There are multiple contradictory signals. It creates chaos, and the decision-making is difficult.
However, today, we have a better approach – Machine Learning. The ML-based approach uses relevant market data and computes the data. The method helps to find a pattern from the data. This machine-learning (ML) algorithm automatically finds a significant predictor or rule and gives information about the past quarter or reliably predicts the future.
Features of AI-based investment tools
Now that you understand how an AI-based investing tool works, you must be wondering what features to look for in the tool or app. Below are some must-have features:
- Personalized stock portfolio creation – Investment recommendation is personalized as your portfolio is different from your friend’s. Why? It is because your risk profile and investment horizon are different. An AI-based tool should have the capability to create a personalized portfolio for you.
- Continuous monitoring – As discussed above, the amount of financial data generated today is huge. We want to use technology because we cannot analyze and use all the available data to our benefit. Your AI-based tool should continuously monitor your portfolio and raise an alert if there are red flags.
- Risk Management System – Your goal as an investor is to minimize the downfall of your portfolio and maximize your returns. You need to enter a stock at the right time and exit before the tide turns. The AI-based tool should be able to do it for you. It should tell you when to take a position in a stock and when to exit it.
Why should you use an AI-based tool for investment?
The number one reason investors don’t make returns in the stock market is that they cannot control their emotions. If you have been in the market for over a year, you will know what we are referring to.
When we should buy stocks, we end up selling them. When we should sell, we add more or do not act. The AI-based app is an excellent solution to overcome human emotions in investing.
Secondly, AI-based investment tools give you the freedom – freedom of time as you do not have to spend hours monitoring and worrying about your portfolio. The choice is yours – you want to give time to your loved ones or the stock market. Both are crucial aspects of growing in life. However, only one has an alternative, as sadly, technology cannot help you in the former case. You can download the Jarvis Invest app and see the power of AI in investing.