AI is coming to institutional investing. A JP Morgan survey shows that 61% of traders see artificial intelligence as the most influential technology in their industry in the coming years – far outdistancing other choices, such as blockchain-based trading or quantum computing.
For many, though, AI is simply a buzzword – a term used to describe advanced technologies that everyone believes will shape the future. The question for investors – especially those at large institutions who manage the billions of dollars in pension funds, corporate bond holdings, and other large accounts – is how they will use AI, which AI-based technologies they will apply to their portfolios, and whether they will take full advantage of everything AI can offer them.
More than Gut Decisions: It’s Time to Add Science to the ‘Art’ of Investing
The fact is, many money managers are not utilizing AI in that advanced manner. Often they focus on an AI “guru” with a proven track record – one who, for example, knows how to apply machine learning techniques to a specific asset in order to predict market moves. By relying on that individual’s skills, investors and managers can show positive results – and for many, those results will be sufficient.
But limiting investments to a specific asset might not be the best idea. Markets rise and fall, and if an asset is on a downward trend, even advanced machine learning could miss some of the factors causing those losses. Meanwhile, other assets may be rising at the same time; instead of shorting a losing asset in order to make a profit, it would make more sense to find an advancing asset and invest in that.
Thus, a reason for investment houses not to rely on a “guru,”-or individual applications of AI for specific purposes, but to utilize an advanced platform that examines a wide array of investments, taking into account thousands of conditions, events, and scenarios that could influence asset values. By utilizing a platform like this, managers have a much better opportunity to advance their bottom lines.
How AI Can Help Investment Professionals Find the Best Possibilities
Thus, if a manager was investing in blue chip stocks – based on the advice of an AI expert – they could deploy an AI platform that utilizes a wide range of technologies to investigate other stocks that may carry more risk. Advanced AI technologies could provide data on just how risky those higher-risk stocks really are. The AI system would analyze enormous amounts of data – current market conditions, quality of the companies, government policy, consumer sentiment, geopolitical considerations, and much more – and compare it with past investment scenarios that resulted in gains or losses for similar stocks. The system would then rate the riskiness of those stocks – enabling managers to take advantage of stocks that are likely to appreciate, and appreciate significantly, as higher-risk stocks often do when they rise in value.
That same strategy can work for any type of asset – from commodities to bonds to real estate portfolios to cryptocurrencies. By analyzing large amounts of data, AI systems can provide managers with guidance to ensure that they choose the best assets for investment out of a wide variety of possibilities. That goes far beyond what an individual specializing in one AI technique for a single asset can do.
Platforms Make it Far Easier to Use AI for Investing
And by utilizing a platform, managers can avoid the expense of setting up an AI system in-house – or the hassle of working with outside consultants, who may not have a full picture of the goals and objectives of a manager. With a platform, managers can explore the best possibilities for themselves, choosing investments based on their goals and criteria – and keeping them in complete control of their investment strategies.
With huge amounts of money to invest on behalf of institutions or clients – and a seemingly unlimited array of assets to choose from – managers need a system that can help guide them towards profits. More professionals are realizing that AI can accomplish this for them – but the best strategy for AI-based investing is to “go wide,” and not restrict AI usage to a specific asset, or the advice of an individual expert. By opening up their vistas to incorporate many more types of investment possibilities, managers will be able to achieve much better results, and offer more comprehensive services to their clients.
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