According to a survey conducted by Funds Europe and CACEIS, 8 in 10 respondents agreed that Artificial Intelligence (AI) and data engineering will be used by investment managers in the future. This sentiment is wellfounded, as AI has the potential to aid human logic and hence lendsmore accuracy when investing.
In fact, the sheer volume of data that it can processwithin a short timeframe points to the usefulness of AI in the financial sphere. Today, AI along with Machine Learning (ML) is already making waves, with companies leveragingboth to enhance human operations, thus providing you, the investor, a superior investing experience.
Enhanced portfolio management
In today’s world, you may consider investing in any of the popular investment options like fixed deposit, mutual funds, equities, bonds, debentures and more. However, the objective of portfolio management and optimisation is to create the most beneficial portfolio from all the options available, and AI coupled with ML provides managers with the tools to maximise returns and minimise risks.
AI-based algorithms can accessa huge volume of useful data to optimise portfolios and its advantage over regular portfolio management is that you can enjoy superior relationship mapping between assets and market factors. AI can harness information from seemingly distant datasets to come up with hedging strategies, predict and forecast movements and develop personalised financial solutionsbased on your aspirations, habits and goals.
Reduced costs of operations
AI aims to think as humans do and when deployed effectively, the result is that a lot of human tasks can be automated. For instance, you can generate reports, use chatbots powered by ML to communicate and harness insights from algorithms. With middle- and back-office work simplified, financial services can be offered to you more economically.As a result, companies that leverage AI can mitigate redundancy inoperations to provide you with services at lower commission rates.
Improved online fraud detection
Unfortunately, online fraud is not limited to just credit card and bank transactions, but extends to investments too. For instance, fraudsters put out fictitious data to trap investors into making a poor investment decision. Today, AI and ML are helping safeguard the interests of investors by developing models that can detect fraud attempts quickly. Developed AI algorithms have the capability to factor in aspects of human psychology in order to create a safe investing environment.
Option of digital advisors
As the name suggests, a digital investment advisor is an AI-based programme that takes on the role of a human advisor. These advisors may seem like a novelty, but are slowing becoming a popular mainstream occurrencefor a few reasons. Firstly, you have fewer people to deal with in the investment process as the programme eliminates the need for a dedicated relationship manager and financial advisor. This translates into lower annual fees and better earnings for you. Similarly, you get data-driven advice that’s tailored to your profile, including recommendations for tax loss harvesting. Depending on how comfortable you are with entrusting the job to programmes, you can opt for a digitaladvisor only, or pick a plan that offers the services of a human advisor for contextualguidance.
Diminished trading risks
AI outweighs traditional investing tactics. With its assistance, you can make optimised decisions and eliminate mistakes due to human error. AI-led algorithms have the capability to sort, model and process large amounts of data, and in doing so, analyse the market in a nuanced manner. All of this can be usedto side-step high-risk margins and avoiding costly investment mistakes.
For example, in today’s times, you may consider investing in high-interest yielding fixed deposits, solely on the basis of high FD interest rates offered. However, the safety of your returns may be a greater concern in this scenario, and your need for higher returns may outweigh the importance of investing in a safe instrument.
In a situation like this, AI may come across as a powerful tool to enable you to take decisions based on facts, figured and data, instead of emotions and instincts.
Apart from these 5 ways, AI is transforming the investment landscape by offering 24×7 services and assistance via voice commands.Thanks to the ability of AI-led softwareto recognise speech patterns, you can talk to a device and gain insights on volatile but high-yielding, equity-linked assets or stable, stable fixed deposit investments!
Therefore, given the potential of AI, it’s a smart move to route your investment efforts to financial institutions that are keen on combining the power of AI with human expertsto offer you a superlative investment experience.
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