One of the most important things to understand about artificial intelligence (AI) is that it is a tool designed to get better, faster, and more efficient as time goes on.
Think about ChatGPT, for example – the tool that most people think of when AI is referenced these days. The most basic version of ChatGPT only debuted in 2022. As more people started to use it for even basic tasks like writing emails or understanding data, it got better at those jobs. The more data it ingests and “trains on,” the more powerful it becomes. To that end, people in many industries are legitimately surprised at what the current version of ChatGPT can do – to say nothing of the potential that the next two years have in store.
In a broader sense, AI also leads to a rapid (and dramatic) transformation of the investment world. Successful investing has always been about creating, storing, and leveraging data to make smarter and faster decisions. AI is great at this, thanks to the advanced data analysis and automation capabilities that come with it.
In truth, there are a number of ways that AI is reshaping traditional investing. Understanding them in their current state today is the key to taking full advantage of them in the future.
The Might of Predictive Analytics
One of the biggest examples of how AI is altering the investment landscape takes the form of predictive analytics. Powerful platforms use predictive analytics that can identify market trends based on available data. This allows investors to get access to insights faster than ever, all so they can act on them just as quickly.
Many AI platforms also include tools, like skip tracing, that use available data to add essential context to current activities. Consider an example where a predictive analytics tool has used historical data to identify what is unquestionably an “up-and-coming” real estate market. Over the next 10 years, this area will explode in popularity, making it the time to get in on the ground floor.
But after a tour of the area, nothing currently on the market matches your long-term goals and risk profile. That’s okay because skip tracing can use available data to help uncover opportunities that will likely be hidden from others.
In addition to identifying target properties (including those that are distressed or that may be vacant), skip tracing can help locate property owners, too. This process typically involves searching through public records, databases, and even social media profiles to uncover any available contact details for the owner. Investors may also contact neighbors or use reverse phone number processes.
After finding the owner’s contact information, you can then reach out to them through phone calls, direct mail, or even by knocking on their door. It’s a great way to get in on an area before your competitors even have a chance to.
The Rise of Robo-Advisors
Another perfect example of how AI is altering the investment landscape has to do with the rise of Robo-Advisors. These tools offer not only personalized portfolio management but also this type of service at a scale that would have been unthinkable five years ago.
As the term implies, a Robo-Advisor is a type of digital platform that uses sophisticated AI algorithms to deliver automated investment advice and portfolio management. Especially if you’re a new investor getting into the industry for the first time, you may not have the resources – or the time – needed to work with a traditional advisor. Robo-advisors can perform a lot of the same functions but far faster, more efficiently, and less expensive than a humans could.
A New Era of High-Frequency Trading
These same AI-driven algorithms also unleash a bold new era of high-frequency trading.
So much success in terms of investment involves making the right decision at exactly the right moment. It takes a lot of time, energy, and luck to do this if you’re still performing every last function manually. Not only that, but at a certain point, you hit diminishing returns due to your inability to scale.
However, these AI-driven algorithms are completely changing the game. They help to not only unlock that speed that so many investors are after, but they also improve accuracy and go a long way towards reducing inherent human bias, too. Artificial intelligence can look at each decision truly objectively at lightning speed in a way that would be literally impossible for most humans.
Democratizing Access to Sophisticated Investment Tools
Finally, one of the most important ways AI alters the investment landscape is by democratizing access to even the most sophisticated investment tools.
Even artificial intelligence itself is a resource that was previously only available for large institutions with even larger budgets. Today, it can be used by virtually anyone with a little savvy and the time to learn a new technology.
To that end, artificial intelligence and its widespread availability are also going a long way toward improving risk management through the real-time monitoring of global financial conditions. Again, this was something that, even five years ago, only giant corporations had access to. Today, even small investors who are just getting into the field for the first time can act on the same insight at a moment’s notice.
These are all undeniable benefits in terms of how AI is altering the investment landscape. It’s equally important to point out the ethical considerations, however – particularly as they relate to the future.
An AI tool is only as good as the data that is used to train it. If that data is biased in one direction, that bias will be introduced in the results. At that point, AI isn’t solving a problem – it’s only making one worse.
Likewise, if that data is of poor quality, the insights derived from these systems will be equally poor. This will only hurt new investors in particular, not help them.
There is and will always be a need for transparency and regulation in artificial intelligence – especially as it becomes more embedded in financial decision-making moving forward. This balance between regulation and autonomy will be difficult to achieve in many ways, but it’s also worth fighting for.
That way, investors can ensure that the alteration of the investment landscape through AI is as positive as possible. New and old investors alike can enjoy all the benefits of this process with as few potential downsides as possible.
