Artificial Intelligence (AI) is a hot-button topic and has been for many years now. At the 2024 CES (Consumer Electronics Show) in Las Vegas, every vendor had some form of AI on display. Utilizing various forms of machine learning, neural networks, computer vision, natural language processing, and, of course, artificial intelligence. We can spend hours digging into how each is different and their various use cases, but in this article, we’ll focus primarily on understanding how these new technologies are being used in finance and investing to strengthen our understanding of what is next.
To be with or without AI: That is the question!
Tropicana launched a campaign saying they’re ditching “AI” and are going ‘all natural.’ The ironic piece is that there isn’t anything artificial about their orange juice, and thus, they’ve always been without “AI.”
For most of us, having some form of AI in our lives makes our day run a little bit smoother. Some examples of this are an automation script that turns the lights on when I walk into the room, sets a timer to automatically turn off a screen at a specific time (great tip for the kiddos!), or one that even opens your car door as soon as you reach for the handle. This little automation can add up to significant time savings, but more importantly, it allows us to focus on more critical or complex tasks.
Focusing on the Value Add
Removing the non-value-added tasks from our work or home lives is not something I would ever complain about. In finance and investing, we see the integration of AI helping remove many menial tasks that limit productivity and impact. Using AI to analyze vast data sets, identifying hidden patterns, and even predictive modeling have all become much easier because of it.
Many years ago, large databases were the golden ticket to the market. If you knew how to use a spreadsheet tool to comb the data and manually find the minor correlation, you could have made millions. Now, being able to unlock the power of the data is available to all. Diving deep into these vast data sets, including historical trends and correlations between markets and sectors, can be concluded in minutes. AI and technology have made it much more accessible for all of us to track financial metrics in real-time.
Other Areas of AI Integration
By far, the most significant and most obvious use of AI is in finance/investment data. However, that is not the only place where AI lives in finance. Algorithmic trading, portfolio optimization, sentiment analysis, and even Robo-advisors are all other points of integration. Algorithmic trading completes trades based on pre-defined parameters, limiting the fear of missed opportunities (finance FOMO). Portfolio optimization allows investors to construct diversified portfolios with their risk tolerances in mind. Rebalancing can also be automated through some platforms. Sentiment analysis uses AI to read articles or social media posts to gauge investor sentiment toward the company or sector. Robo-advisors are AI-powered platforms that provide automated investment advice and portfolio management.
What is next for AI and Investing?
Mic Drop! Robots are taking over starting next week! Well, not exactly. Lucky for us, we’re not there yet.
I predict that AI will continue to drive innovation and speed in the industry. We’ll see more of these in-depth analyses conducted by AI, some interpreted and some even giving next-step recommendations. This is where it gets tricky. Almost all foresight (prediction) models take historical trends, seasonality, variability, and various key data point injections into account (new leadership, new technology, new billing…) to compute the projections. History is important, but it doesn’t always repeat, nor can we accurately predict what it will bring. What we do know is that over the long term, investments in the market do well. Consistent investing with compound interest is key to success as well. This is why we highly recommend a financial advisor who acts as a fiduciary for you and has the heart of a teacher to walk with you. Our team at Whitaker-Myers Wealth Managers focuses on the intangibles and has the analytical power of Robo-advisors with the human touch to provide you with the best experience on your journey. If you don’t have an advisor, please contact anyone on our team, as they are ready to help answer your questions.
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