How Artificial Intelligence Will Affect Your Investments
Technological innovations have had a significant impact on everyone’s lives over the past few decades. While there have been numerous game-changing innovations, I believe that two, in particular, stand out the most during my lifetime.
These innovations have transformed the world around us in a way that is akin to a technological singularity. However, there is a third technological singularity that is underway. It is imperative to educate ourselves about it.
Technological Singularities: Web Browsers and Smartphones
Electricity, the automobile, and flight are three significant innovations that changed the world. But in my lifetime, the two innovations that have had a massive impact on our daily lives were the development of web browsers in the early 1990s and the adoption of the smartphone in the early 2000s. Following the introduction of web browsers, the internet grew explosively, and it’s hard to imagine life without it today.
Similarly, smartphones brought the internet to us in real-time. We now take pictures and record video, listen to music, navigate us, and browse the internet from anywhere. If you were in a restaurant in 2000, nobody was staring at a phone. Ten years later, half of the restaurant would have been staring at their phones.
The Next Technological Singularity: AI
The third innovation is unfolding now. It is the rise of artificial intelligence (AI)-driven chatbots. What chatbots are doing right now is mind-blowing, and it’s hard to keep up with the pace of innovation. I think a decade from now we will be saying “Can you imagine our lives without chatbots?” Imagine your life without the internet or a smartphone, and that’s where AI is headed.
Read This Story: A “Pure Play” on Artificial Intelligence
I am not suggesting that this is all a good thing. There’s been lots of bad with the good. Some would argue that the bad outweighs the good. I fear the potential of this chatbot revolution for causing massive unemployment. There are already lots of websites that have identified the jobs most at risk from ever-improving chatbots.
The Potential Impact of AI on Investing
I think the way we invest will be significantly impacted by AI. There is great potential for a real-time chatbot to evaluate our portfolios, and quickly identify potential improvements. Once it identifies such investments, you can query it on specific things about a company, such as “What are the risks facing this company in the next five years?”
I thought it would be an interesting experiment to go straight to the source, and ask one of the popular chatbots, GPT-4, how AI will impact investing. It took only about 15 seconds to spit out the answer (including the disclaimer at the end):
“AI is poised to have a significant impact on stock market investing for individuals in several ways:
Enhanced Data Analysis: AI algorithms can process vast amounts of data at high speeds, enabling investors to analyze financial data, news, and social media sentiment more efficiently. This can help identify trends, patterns, and potential investment opportunities that may have been overlooked by human analysts.
Improved Decision-Making: AI-powered tools can help individual investors make more informed decisions by providing real-time insights, risk assessments, and predictive analytics. These tools can help investors better understand the potential outcomes of their investment decisions and manage their portfolios more effectively.
Personalized Investment Advice: AI-driven robo-advisors can provide personalized investment advice based on an individual’s financial goals, risk tolerance, and investment horizon. These platforms can automatically manage and rebalance portfolios, ensuring that investors maintain a diversified and optimized investment strategy.
Algorithmic Trading: AI can be used to develop sophisticated trading algorithms that execute trades automatically based on predefined criteria. This can help individual investors capitalize on short-term market opportunities and minimize the impact of human emotions, such as fear and greed, on their trading decisions.
Enhanced Risk Management: AI can help investors better manage risk by identifying potential threats and vulnerabilities in their portfolios. By analyzing historical data and market trends, AI can provide insights into potential market downturns and suggest strategies to mitigate losses.
Lower Costs: AI-driven platforms can help reduce the costs associated with investing by automating various tasks, such as portfolio management and trade execution. This can make investing more accessible and affordable for individual investors.
While AI has the potential to revolutionize stock market investing for individuals, it is essential to remember that AI-driven tools and algorithms are not infallible. Investors should continue to educate themselves, stay informed about market developments, and maintain a long-term perspective when making investment decisions.”
AI will affect your life, just as sure as you used the Internet — perhaps on a smartphone — to access this article. Get ready for it.
Editor’s Note: In the above article, our colleague Robert Rapier imparted invaluable investing advice. But we’ve only scratched the surface of his expertise. Consider his premium trading service, Rapier’s Income Accelerator.