AI in Investing

Think about the last time you made an investment into a company. Either you probably heard a tip from a classmate, colleague, or family member, or you spent your precious time researching the company's financials. However, now with the rise of AI, much of this process can be automated. In fact, recent data shows that about 20% of Gen Z and 26% of millennial respondents use generative AI for every investment decision they make.

So you may be wondering, how exactly is AI reshaping the world of investing? In this article, we cover 4 key ways that I project AI will transform markets.

The End of Emotional Trading

Have you ever panicked when your investment dropped 5% in one day and sold your shares? One of the biggest hurdles for any investor is their own psychology. Fear and greed often lead people to buy at the peak and sell at the bottom. AI removes this human error by sticking strictly to data and pre-set instructions. Unlike humans, these AI models do not get nervous when they see a red candle on a stock chart. Instead, they can look at historical patterns and data to decide if a dip is a disaster or a buying opportunity.

Hyper-Personalized Portfolios

Financial advisors take into account your financial status and goals when making investment decisions. However, your options are limited by whatever they advise you to invest in. Now, AI allows for mass customization. New platforms can take your specific goals, your age, and your comfort level with risk to build a portfolio that is unique to you. For instance, if you specifically only want to invest in cutting-edge technology companies, then the AI can find hundreds of opportunities in order to match your values.

Real-Time Action

In today's modern market, news drives prices, but there is one problem: there is simply too much news for one person to follow. With AI tools, an investor can scan thousands of social media posts, news headlines, and even transcripts from earnings calls — all in seconds — to spot trends and react before the rest of the market catches on.

Democratization of Finance

For decades, complex investment strategies have been only used by Wall Street professionals with years of experience and million-dollar funds. Now, AI platforms are bringing institutional-grade analysis to everyday investors for way cheaper. For example, platforms like Danelfin and Prospero.ai can analyze a company's financials and assign an "AI score" based on how strong the investment is. This levels the playing field in a way we've never seen before.

Final Thoughts

AI is transforming investing by removing emotion, processing mountains of data instantly, and creating hyper-personalized strategies that would have all cost thousands of dollars in tools just a few years ago. While AI can do much of the heavy lifting, it is still important to remember that it can't guarantee returns or accurately predict the future every time. So always make sure to do your own research and use AI as just another tool to inform your investing decisions better.

The views and opinions expressed in this article are solely those of the author, and do not necessarily reflect the official position of Locker Room Finance or any other organization or company.

Written by Matthew Park, LRF Intern & Contributor