Successful investing takes time and effort. It requires that a person investigate companies and their business models. Successful investors only buy into a company when they fully understand what that company does to make money and how they will continue to make money for years to come. Assessment of intrinsic stock value must be carried out when buying a stock and when deciding if it should remain in one’s portfolio. On top of that, successful investors are constantly looking for newer and better investments. All of this is a lot of work and requires sifting through lots of data. Will AI (artificial intelligence) help you invest more successfully than you already are?
What Is AI?
AI stands for artificial intelligence and is the simulation of human thinking and reasoning via computer programs. Because computer systems are capable of processing huge amounts of data faster than a person can, they can potentially find more useful investing information than a person might. The problem with computer programs has always been that they are not, by nature, intuitive and only follow the precise instructions that they have been given. Newer systems have been “trained” by interactions with people, have been given multiple examples of human responses, and can commonly produce human-like exchanges of conversation. A recent example is the ChatGPT program by OpenAI that can engage in realistic (and at times unsettling) conversations with humans.
Algorithmic Trading Uses AI
Algo trading often drives the stock market up or down with bursts of buying and selling based on breaking news and events. Using super-fast computers and efficient programming these trading programs seek to beat the rest of the market to a trading opportunity. Unfortunately, for those who use them, they are often wrong in anticipating the direction that the market will take. Unfortunately, for the rest of the market the “algos” can disrupt trading and lead normal trader into making poor decisions. Garbage in and garbage out was the old computer programmer saying. When a computer program has data and programming inadequate to its task it will spit out bad trading advice or execute unprofitable trades.
How Can Advanced AI Help Investors?
The safest way to use an AI program for investors is to give it clear instructions about what you are looking for. Then let it go out and get data, analyze that data according to your specific instructions, and prioritize the results. Much of this sort of thing is already available with an internet search. A Google search for stocks with highest dividend yield will give you twenty-five high yield stocks starting with AT&T at 6.12%, 9 highest dividend paying stocks in the S&P 500 starting with Pioneer Natural Resources Co. at 13%, and more and more lists. Unfortunately, many lists are dated and many are cherry picked to show companies that may well be paying for this kind of “advertising.”
Can You Use AI to Project Which Company Will Dominate Its Niche?
A practical question for today’s investor is which auto company will be the most profitable as electric vehicles become more and more of a dominate force in the industry. Here is where many would like to have an AI system sift through all available data and tell us if Tesla will provide the greatest return on investment going forward or if the top electric car maker will be Volkswagen followed by Renault-Nissan-Mitsubishi, Chinese manufacturer Geely, and then Tesla as predicted by CNN Business.
The problem now becomes one of judgment and not simply tabulation of tables of ranked data. Will an AI be able to anticipate which auto company’s designers will come up with the most stylish vehicle, which company will find and use the best battery technology, and who will anticipate the next new thing in electric vehicles and lead the pack to profits. For humans, these become intuitive issues. Perhaps that is because we are unable to process the same amounts of data that a sophisticated computer program can. On the other hand, anticipating what the public will want in a product is difficult in the best of times and that may be where success lies rather than in tabulating mountains of data. If that is the case, there will always be people who will outperform AI in the investing niche.
Will AI Help You Invest? – SlideShare Version