6 Key Trends For Artificial Intelligence Powering The Investment Sector

by Abhinav Angirish    Sep 07, 2018

artificial intelligence

The world is on the verge of Industrial Revolution 4.0 leading with the Internet of Things, Big Data and Artificial Intelligence. Mass production led by Computers connected each other wirelessly. Artificial Intelligence and automation are not the things of the past, but they are taking the world by storm. When the whole world is churning out by these things, how could the financial or investment sector to be left aside?

When Information Technology is changing the way of investing, increasing efficiency and reducing costs, Artificial intelligence or Machine Learning, on the other hand, giving advice and spitting out reports on their own. Asset Managers are also investing in such tools to make Alpha for their investors. There are so many instruments and ways IT is impacting the investment sectors, here are some ways AI-related technologies are having an impact on the investment sector.

1. Technical Analysis: Starting from a well-known tool Technical Analysis, is not a new thing for the investors but a lifeline for the traders. Technical Analysis is nothing but an IT tool to predict where the Stocks, Indices and Sectors are heading. A Software analyzes Price, Volume, Moving Average, Chart Patterns and, other market data to guide investors, whether a stock or indices is overbought or oversold, whether it is a time to buy, sell or stay put. Technical Analysis helps investors to find the right price to buy, sell, set a stop-loss and the time duration to stay invested.    

2. Fundamental Analysis is not too far away: Fundamental Analysis is known by the work of an analyst, scanning an organisation from its background to make the future projection, but as the Automation and Machine Learning are taking charge, all these works have become automated. AI Softwares are using big data to analyze a company’s business, performance, and, its valuation. It is not only taking historical data in evaluating organization, but shaking internet, social media and new events to come out with better valuation and effective analysis.  Various brokerage houses are experimenting with AI stock picking tools to identify potential Alpha making investments that their human analyst might have missed, Merrill Lynch and BlackRock are the names of the few. 

3. Robo Advisors: Artificial intelligence is turning Robots into a skilled adviser form an unskilled manufacturing labour. Robo Advisors are not just helping investors in selecting stocks, effectively diversifying their portfolio but they are tracking their investments regularly to make changes whenever it is needed. Robo answers trade questions, giving suggestions and predicting where markets are heading. Various FinTech startups are offering financial services at a cost-efficient price as it is automated and algorithm-based services. These are also free from mistakes usually human make due to their greed, fear and emotional behaviour. Robo Advisors are leading us in the way which would change the whole investment industry.

4. Algo Trading: We are living in a world where markets are leaded by data and events, where traders and investors are less concerned for their stocks, and more about the open interest and put-call ratio as they decide where markets are heading. Algo Trading does all these kind of analysis for you. Computer software programmed to trade, which works on preset technical levels. Software identifies arbitrage opportunity available in the market and grabs it to benefit users. It crunches huge amount of data, read patterns, charts, trade volumes, web search and adjusted its trade accordingly. Algo trading is an analytical rigour tool scrutinizing market behaviour, moving average, patterns and price to identify potential trade to execute.

5. Tailored Service: Generating all things for all the people is the thing of the past, the time has been changed and personalized services have taken over. AI software enables portfolio managers to provide specialized services based on their client portfolio which earlier used to be on the paper. IT has changed the way the investment services used to be provided earlier and it is still changing for the better. 

6. Mobility: Data are important in investments, could it be quarterly results, Government policy, growth numbers or the others and it should be of real-time otherwise one could miss the opportunity to make returns. Information technology has revolutionaries the whole process and cut the time down dramatically. IT enables one to access its portfolio, make changes and catching up the world news, whenever and wherever it wants.

IT has changed the process, investments used to be done in the last one or two decades and now the Artificial Intelligence is taking a big leap in the same sector. Investors are investing with a tinge of software now, is expected to be changed in the near future when the process could be fully automated, but humans are to be needed when financial world changes and Algo not equipped to adjust itself accordingly. Now when technology is transforming the Investment Sector, most agile and astute would turn out to be the winner.     

 (The author is founder, www.investonline.in )