For the past year, all I have been hearing about is Artificial Intelligence. It really has become a hot topic; how it may put some out of jobs, but increases productivity for others. And I have to admit, it has helped me a lot with some of my content planning and marketing strategies. An interesting topic now being talked a lot is how AI will change the face of investing. Will it make things easier, or will some of its pitfalls pose as an issue to the avid investor? Of course, like everything with investing, there are risks and benefits to weigh up. So let’s discuss these here today.

New Companies & Products Will Emerge

Let’s talk about the bigger picture first. With new technology comes new business opportunities, and with this comes new investment opportunities. During COVID, a lot of people invested in healthcare, pharmaceuticals and mask manufacturing companies. We also saw a boom in e-commerce and online platforms. People were spending more time online, and more time buying products online, hence, tech equities saw quite a growth during this period. This may be similar with AI; with new companies and technology popping up, investors will want a piece of that pie. Not only that, other companies and industries may thrive with AI; start-ups will minimal manpower, may find that they can increase their bandwidth for production, all with the use of AI. Industrial, travel & leisure and consumer services may see a great shift from man power to roles automated by AI. One thing to be aware of is that the use of AI means that companies can be more experimental with their products and business models, because if they fail, it won’t be as high of a loss to them. So beware not to invest in some exciting trial or business experiment that may not pull through.

Well-Known Brands Over Small Successes

When it comes to AI, I think it is smart to think about how this technology will benefit large, well established companies, instead of thinking about the AI companies themselves. Companies like Google, Amazon and Microsoft all are huge well-known companies. They have a good track record, and whilst past performance is not indicative of future performance, we know that these companies have the resources and infrastructure to implement and blend AI with their current business models, meaning that we may see a positive growth, because they are using AI.

This Is a Long-Term Thing

Like anything that is development, or indeed with investing, we should look at this long-term. Hopefully AI will be here to stay, helping us in all aspects of our work and life. We are still in the infancy stages of AI, and I look forward to see how it will develop in future. All investments should be looked at with a long-term horizon, not just jumping on the band-wagon of a short-term fad. Hence why I think it’s important to consider the longevity of the companies you are investing in.

Investment Platforms

We already have robo-advisors when it comes to investing; you can open an app, answer a few questions and the app will suggest a portfolio for you to invest in. JP Morgan has already applied to trademark an IndexGPT and is developing a ChatGPT-like software for selecting investments for their customers.

Betterment was the first robo-advisor launched in 2008, with the purpose of rebalancing assets within target date funds to help manage passive, buy-and-hold investments through an online interface. This wasn’t new technology, but now most robo-advisors use passive indexing strategies using various algorithms to optimise. These have not replaced human advisors. Most high net worth investors seek the professional advice of an actual human, because active strategies, if done correctly, can out-perform passive ones. Not only that, human advisors can give advice when it comes to take, repatriation, and take into consideration personal matters when it comes to their planning.

It seems that the new ChatGPT-esque developments coming up may affect robo and human advisors in a few ways; this new technology will be able to create models and analyses that robo-advisors can’t, and would take a while for human advisors to do. AI can analyse and process masses of financial data, from over the years and geographical locations, a huge feet for an individual, do create robust reports that take into account the nuances of financials and the market. This has already led to models, such as the BloombergGPT model, already outperforming other models and benchmarks.

Human Interaction

It seems that, for now at least, there will still be a need for real life financial advisors- people enjoy socialising with other people, and that goes the same in business. Building the trust between client and advisor is so important and invaluable, that cannot be done with a robot or an AI chatbot. I think that this sentiment will continue, especially with financial planning. For now, AI cannot understand your current situation with home-life and family, your personality, or get excited about your future goals with you. Actually, all these are key elements of creating that financial roadmap for your future.

Artificial Intelligence is exciting, and it’s here to stay, and will only develop more over time. Always with investing, it is important to stay educated, but not get wrapped up in the hype. Weigh up the pros and cons, understand your own risk tolerance and look at your investment strategy for the long-run.