How Artificial Intelligence Will Change Investing
With all of the recent buzz around Chat GPT… Many investors are now asking themselves how Artificial Intelligence might change investing.
Over the past few years, Artificial Intelligence has made great strides in impact and technology. From self-driving cars and voice recognition software to attention-fishing social media algorithms, Ai has transformed how we live and interact with technology.
Automation and algorithms have been used in the stock market for many years. It’s estimated that automated algorithms execute around 60-75% of all stock trades.
Traders have been using algorithms to identify and exploit trading opportunities based on breaking news and macroeconomic events for years.
This trend will likely increase as Ai technology evolves.
Here are some ways that the average investor can use Artificial Intelligence (such as Chat GPT) to their advantage as Ai continues to improve:
#1: Make Research Easier
Before the internet, it wasn't easy to research different companies. The internet opened up the floodgates of information to make research easier for everyone.
Google and YouTube have been standard tools for many investors to find research information on companies they’re interested in.
But our modern-day problem is too much information at our fingertips. It’s hard to swift through the vast world of information. Let alone determine what information is helpful and what information is noise.
Artificial Intelligence (such as Chat GPT) will make shifting through the vast amount of information easier. And allow us to find direct answers and information relevant to the companies we are researching.
#2: Translate The Language of Business
One of the most significant barriers to investing in stocks is learning the language of Business (AKA accounting). If you're investing in individual stocks and don't understand how to analyze a company's balance sheet, income statement, and cash flow statement... You are investing at a disadvantage.
Artificial Intelligence will likely make it easier to break down financial information in an easy-to-understand way. And be able to explain the overall financial health of a company to you.
Reading through Financial Statements can take days and be boring for many. But using Artificial Intelligence to highlight critical information and analyze a company's financial health can make it easier for many investors to improve their research and make better investment decisions.
#3: Highlight Risk & Give Another Perspective
It’s easy to overlook potential risk factors when considering a potential company to invest in. The more you understand a company, the less risk you take. But you don’t know what you don’t know.
Artificial Intelligence will make it easier to compile a list of potential risk factors you might’ve overlooked.
It’s human nature to only look for information that confirms your own biases…
But Artificial Intelligence will make it easier for us to gather different perspectives on a potential investment to allow you to see the “full picture” and make better investment decisions.
#4: Make Better Projections
Artificial Intelligence is trained on large amounts of data.
The more data it has, the better projections it can make.
It’s important to remember that the past can never fully determine the future. But a lot can be learned from past events that can help predict what might happen in the future. The human brain can’t analyze as much data as Artificial Intelligence can. At least not for now…
Artificial Intelligence will help create different projections based on different scenarios.
For example… you could ask Ai to give you the worst-case and best-case scenarios for investing in a company like Tesla over the next 5 years.
The more data it has, the more it could lay out potential projections. And ideally, reduce the amount of bias in those projections to help you make better investment decisions.
#5: Help You Build a Portfolio
There is no such thing as a perfect “one size fits all” portfolio.
Everyone comes from a different financial background with different investing goals.
And depending on what your goals are and what risk tolerance you have, the optimal portfolio that works for you will be different than someone else.
You'll be able to tell Ai what type of investments you're looking for and ask for suggestions on what investment options meet your specific criteria.
The suggestions will then be better curated toward your specific situation.
Final Thoughts: Artificial Intelligence + Investing
Artificial Intelligence will make investing easier. And will further cut out the need to hire financial advisors or financial planners since managing your own money will become easier to do.
As it stands now, Ai cannot make any thoughts of its own. It simply compiles large amounts of data and uses algorithms to find what it thinks you want.
Chat GPT (as it stands now) is kind of like if Google had a kid. It’s not perfect. So Investing will still require your own judgment.
But as Artificial Intelligence continues to evolve and become more powerful, it will bring a new level of insight to the stock market.
We will be able to better analyze data, create more accurate projections, and understand overlooked risk factors.
These advancements will help both professional and retail investors make better decisions when it comes to investing.
AI will give investors a better understanding of the financial markets and make investing more accessible to those who were once intimidated by it.
The future of investing looks bright, and AI is at the forefront of that revolution.
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As Always: Buy things that pay you to own them.
-Josh
Blog Post: #083
