Could ‘trading bots’ powered by AI change the investing landscape?

You will be inundated with promises to let artificial intelligence manage your money if you search for “AI investing” online. Recently, I invested thirty minutes in learning what supposedly “trading bots” using artificial intelligence might achieve with my investments. Many make the overt claim that they can provide me with large returns. Your capital, however, may be at risk, as every respectable financial institution cautions. Or, to put it another way, if someone, a computer, or both, is managing the stock market on your behalf, you could lose your money.

 

However, according to a US survey conducted in 2023, almost one in three investors would be content to have a trading bot make all of their decisions for them because to the recent hoopla around AI’s capabilities. John Allan advises investors to use artificial intelligence with greater caution. He is the UK’s Investment Association’s (the trade association for UK investment managers) head of innovation and operations. “Investment is something that’s very serious, it affects people and their long-term life objectives,” according to him. It might not be wise to follow the newest fad, for this reason.

 

You may have expected Mr. Allan to say this, considering that AI-powered trading bots may wind up eliminating the need for some highly skilled but costly human investment managers. But these kinds of AI trading are relatively new, and there are certain problems and unknowns. First off, artificial intelligence is not a crystal ball; it cannot predict the future any more than a human being can. Additionally, throughout the previous 25 years, unanticipated occurrences like 9/11, the economic crisis of 2007–2008, and the coronavirus epidemic have caused disruptions in the stock markets.

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