Is Using AI for Investing Profitable?

 

AI investing has become one of the most attractive options for new investors seeking to grow their wealth while avoiding the steep learning curve that comes with the investment world. What makes AI investing so different from the traditional approach? To begin, the methodology is entirely different; by combining traditional investing with AI investing, they can guide and protect the average investor better.

AI Investing Traditional Investing
Using machine learning and algorithmic development to create and execute investment strategies based on recognizable patterns taken from decades of market data Employing an experienced investment advisor who creates and executes an investment strategy based on their personal experiences in the market

 

So why choose the quantitative approach? The essential benefits of using AI for investing are more strategy options, safer monthly returns, and smarter risk management.

AI Strategies

An important thing to keep in mind is that investment strategies of all types are available through a traditional investment approach. The biggest difference is that AI investing algorithms are historically much better at reading the market for potential upturns or downturns than the average individual investor. 

Human beings with such ability have often acquired it through years of investment practice and difficult lessons. With AI investing, however, even a newcomer can pick that information up. Some examples of popular strategies when using AI for investing include:

  • Long: Investing your own money in a stock you believe will increase in value
  • Short: Selling borrowed stocks that you believe will decrease in value with the intention to buy them back later for a profit
  • Arbitrage: Buying stock in one market and selling it in another to take advantage of the small price differences between them
  • Event-Driven: Buying or selling based on events in the corporate world, such as a buyout or merger
  • Global Macro: Buying or selling stock based on major world events, such as international gatherings, war, or famine

Each of these strategies carries with them a varying degree of risk and profitability; for example, shorting can be a great way to generate a high yield in a short period of time, however, the investor can end up owing more than they sold if the price of the stock gaps up instead of down. There is risk in this decision regardless of the approach you take, but making this investment with an AI gives you a more sure footing for such a decision.

Profitability

As a general rule, using AI for investing generates a healthy net return for investors. They often earn more than traditional investing, averaging between 2.5-4% more per trade than traditional platforms do. Although, these averages may not necessarily reflect the individual circumstances of your specific investment. This does vary somewhat depending on the investment platform you are working with. 

Platform Pros  Cons
Quantitative Hedge Funds Generates large returns  Associated fees make them inaccessible to the average investor
Robo-Advisor Available to anyone Generate more modest returns since they focus on wide-reaching indexes to diversify your portfolio

 

Investors should also know that there are some brokerage houses that utilize AI services; these instances are more so ideal for the more aggressive investor who doesn’t have the resources to join a hedge fund, but they are hard to find and often feature AIs that are relatively untested and therefore unreliable. 

What To Look For When Using AI for Investing

While using AI for investing is profitable, it can be hard to find the right platform for your needs. The larger AI investing landscape consists of either robo-advisors which limit your strategy options or hedge funds that the average investor cannot afford to be a part of. Median solutions that offer AI investors aggressive strategy options at an affordable rate are ideal, but hard to find. 

It is precisely for that reason that RIMAR Capital exists. We offer average investors advanced quantitative investment options that run the gamut of strategic options from aggressive to more long-term solutions. Which one you select depends on an initial consultation with one of our financial advisors—a standard service with our company that is rarely found in most algorithmically-centered institutions. Contact us if you’d like to discuss a future partnership.

 

Ryan Gordon

Ryan Gordon

Ryan is a qualified chartered accountant of South Africa. Ryan is an avid sportsman who also enjoys reading and spending time with friends and family in his down time. Ryan joined the RIMAR Capital team in 2019 as a business development manager.

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