Is AI a reliable investing tool?

Advances in technology are transforming almost every facet of our lives. Electric vehicles are changing the way we travel, as well as our impact on the environment. Smartphones are progressing to the point where, at some stage in the not too distant future, they’ll be the only thing we ever need to carry with us.

But these developments are impacting more than just our personal lives. They’re having a huge effect on the way businesses are run, too. From product design and workflow processes to marketing strategies and global communications, organisations are being revolutionised by improvements in technology.

The evolution of artificial intelligence (AI) is a relatively new phenomenon in comparison to the internet or the mobile phone, but it’s becoming increasingly important across a number of sectors, including those who operate as traders and brokers in the foreign exchange markets. But what is AI, how can it be used, and is it a reliable investment tool?

What is AI?

Definitions can be broad as AI is used in a number of different ways across various sectors, but Investopedia describes it asthe simulation of human intelligence in machines that are programmed to think like humans and mimic their actions.”

The rise of AI

An increase in the availability of a larger volume of data means that the demand for AI is arguably greater than ever before. Technological developments mean it can process huge amounts of information at a faster rate, while the cost of storing that data has also reduced significantly, making it a more attractive tool for businesses to implement.

The use of AI in investing

A 2019 report from Deloitte described AI as “the next frontier for investment management firms” and outlined five ways that the technology can be used within portfolio management and client enablement:

  • Automated insight
  • Relationship mapping
  • Alternative datasets
  • Growth opportunities
  • Client outreach

Is it reliable?

That same report extolled the virtues of using AI to manage risk – the fundamental challenge for investors everywhere. It described AI’s value in automating data analysis and reducing administrative tasks, which in turn enables employees to focus their energies on higher-value assignments, such as identifying profitable investment opportunities.

Although AI can complete tasks in a fraction of the time taken by people or previous technology and it has displayed its ability to change through deep learning, the human element cannot be removed from the investment process altogether. AI still relies on humans to create the parameters of the data it analyses, and the two working in partnership is likely to produce the most profitable results.

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