All of us have been aware of algorithmic investment for many years, but tools like ChatGPT have gained massive popularity recently. AI investing and AI stock picks have the world in a buzz. So the obvious question is, “Who makes better investment decisions? A fund manager or AI?”
To get ahead of this, we want to share information that will help gain clarity into who makes the best investing decisions.
Can AI Make Investment Decisions?
In short the answer is yes. But are those investment decisions actually good? That has yet to be seen. There have actually been AI tools which have helped investors in the past and in the present day, so technically they have been making investment decisions for a while. But all of this is being guided by humans to this point.
Stock Picks vs Financial Advisement or Comprehensive Investing
There are cases where AI has been making Artificial Intelligence stock picks and also beat the professional’s investments but it isn’t fair when it comes to investing in general. As an investor, if all you want to do is buy and sell traditional equities, then it isn’t really investing. But if you are looking for a way to diversify and meet your long-term investment goals, you will need the help of a manager or human advisor.
The History of AI and Algorithmic Investing
Firms as well as funds have used algorithms in their trading processes for the past four decades so it is not a new territory for the investment space when it comes to high-frequency trading. But with the steady advancement of AI, large and small firms alike are taking the benefit of integrating AI into their strategies, whether it is directly or by working with third parties who are also using this technology.
Fund Manager Performance vs AI Investment Performance
When you look for data on this question, you aren’t really asking the right question. On the Internet, you will find information supporting AI delivering higher performance while other reports show funds performing better. But in reality, AI on its own does not have enough data that supports its overall performance over a long period of time. It is being guided by smart humans who know what should be included in the algorithms as well as in AI tech.
Hence, in reality, AI’s performance is just an extension of the fund managers’ performance.
Benefits of Working with a Fund Manager
Decisions are ultimately made and you can make them on your own, use AI or choose to work with a fund manager. However, there are a few benefits of working with a fund manager that you will not get with AI (at least for a while).
Value Based Investing
Several firms and funds focus on investing in the areas that you care about and AI is not set up to take this type of investment approach.
Education & Motivation
When it comes to investing, you need to understand that the times can get tough and this is when you should not prematurely pull the investments. AI cannot explain this to you, only people can. And in some cases, you will need a little help feeling comfortable moving ahead with your investment journey, which only humans can explain well.
Access & Relationships
AI can trade and transact for you but the platform will not have access to the same opportunities which can be secured through the relationships that are held by fund managers or advisors.
AI may be a hot topic today and it could even be cheaper, but AI investing might never give you the same results as working with a fund manager.
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