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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 data in large amounts, 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 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 when you invest, you don't just have to invest in the stock market. There are other securities available such as ETF (Exchange Traded Funds),
Using AI for this purpose can help to prioritize your investment portfolio how 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, it can 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 investors, 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 investment purposes in general.
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 RRSP's, 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.
