We live in a time when we cannot imagine our lives without technology. Most of us start our day to read the world news at the tap of a button on our mobile. When it comes to entertainment, whatever we want to see, is available on a small mobile device. Technology is taking care of all our needs. Can it also take care of our money and investment?
Yes, technology has come a long way, and it is helping us with our investments. One technology that is making it possible is Artificial Intelligence. Let us understand this technology and its impact on the world of investing.
Artificial Intelligence in Investing
In simple language, AI is a branch of computer science that enables machines to imitate human behaviour. Let us understand with an example. Assume you want to analyze a stock. You will do your analysis on data pointers, and these data pointers will be the same for every analysis. You can make the machine learn how to study stocks on data pointers (machine learning). You will use AI for analysis based on the same pointers.
Areas where AI is used in the financial world
At Jarvis Invest, we use AI to pick the right stocks for you. But Ai is not only about picking stocks. AI is used in many different areas. Some areas are:
- Risk management – In the last article, we talked about our risk management system in detail. The system is completely driven by AI. AI is not biased (no emotions), and hence the chances of it predicting risk are much higher. Even the big banks assess risks before giving loans to customers using AI.
- Fraud detection – You may not know, but your money is protected by AI 24*7. All the transactions you do are tracked by your credit card company. For example, if you make most of your purchases in Pune and suddenly your card is swiped in Delhi, you may receive a call or alert from the bank.
- Financial advisory services – Many companies have started financial advisory services completely AI-driven (Robo-advisory). Artificial intelligence algorithms can analyze your portfolio so that you can receive the information you need as quickly as possible.
You may be wondering why we are discussing these points. To give you confidence that Artificial Intelligence is an advanced technology and the financial world is backing it. We believe it is the future.
Pros of AI in investing
You must have some confidence now in AI as technology and its application in the financial world. Coming specifically to investing in stocks and AI, below are the advantages of it –
- No human emotions – The biggest problem for investors is human emotions. A personal feeling which is emotions over logical thinking affects and clouds your judgment and analysis. Sometimes, you take a buy and sell call driven by emotions – reading market news, seeing your friend making profits, etc. When it comes to AI, there are no emotions in the analysis. The stocks are picked based on data.
- Millions of data pointers – If we ask you to select a stock after research, you can analyze the company on 10 to 15 parameters. For an individual retail investor, there are limitations. However, technology has no such limitations, and we are making the most of it. To check the company’s fundamentals, we analyze 3.5 lakh data points, 11 million data points on the Price and Volume Time Series, and much more. Can a human brain do it? Possibly not.
- Risk Management – As mentioned earlier, AI is not just about stock selection. It is also about risk management. With so much analysis happening 24*7, the AI system can alert investors when a stock is flagged red.
- You save time – Time is priceless. The time you spend with your family, preparing breakfast for your child, etc is gold. Since AI takes care of everything related to stock investment, you have time to spend with your family. You don’t have to spend hours daily tracking stocks or days every quarter analyzing the results of companies you have invested in. It is taken care of by AI.
- Ability to invest without knowing too much about the market – In India, only a minuscule population invests in direct equity. There could be two reasons – you don’t have an interest in knowing the market, or you don’t have the time. Without understanding and knowledge, if you enter the market, your chances of making a profit are bleak. AI gives opportunity to everyone to invest in direct equity and maximize the returns.
Cons
AI cannot execute it for you – Due to SEBI regulation in India, AI cannot go and buy (or sell) a stock for you. Hence, even though you save time, the final decision has to be taken by you. In a way, it is not a disadvantage but a limitation of AI in investing.
Before you go
Before you invest your money, you should ask yourself – what is the purpose of your investment? Are you serious about your investment? If you are, you need to minimize your risk, learn about the market and focus on growing your capital.
Can you do all this on your own? If not, we have given you enough reason for taking AI’s support to make your investments. Make use of technology to live a better life and make the most of the stock market.