How Can Artificial Intelligence Improve Your Investment Decision Making?
Artificial intelligence is one of the most revolutionizing technologies. It has been in development for the last decade and is finally here. Almost everything uses AI to generate the most accurate results in this digital age. This includes AI in Google’s traffic data to sort your emails, Facebook to have a face recognition feature, and social media platforms to alter your product recommendations. Just like all the other aspects of our lives, AI is also revolutionizing the finance industry and how investments are being made across the globe.
AI started contributing to the finance industry by enabling mobile check deposits, helping top investors make the right investment decisions today. It is being employed by various financial institutions today to help their clients invest smarter. Here is how Artificial Intelligence can improve your decision-making as an investor too:
1. Better Forecasts
AI and machine learning have enabled investors and expert asset managers to integrate new information more quickly and easily into their investment portfolios. With increased computing power, volumes of data regarding the potential investors can be used, and statistical models of AI can help predict more accurate results in terms of the outcome of each investment. This enables investors to improve the allocation of their assets into the most profitable opportunities and mitigate the overall risk associated with investments.
2. Decreased Emotional Biases
Emotional biases can disturb investors’ ability to make the right decisions. In fact, behavioral finance has concluded numerous times that investors are usually not the most rational when making investment decisions. This includes retail investors, institutional investors, and individuals looking for investment options without prior experience. They are all susceptible to biases, which can easily cloud their judgment. One of the best examples of this is the University of Chicago’s sale of equity in 2008, which resulted from aversion bias. AI tools help reduce and eliminate such irrational human tendencies by ensuring that all results are based on data. AI results in evidence-based decision-making, which can improve the chances of successful investment.