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AI in the Stock Market: Is It Better Than Humans?

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Is the age of frantic Wall Street stock brokers dead? Will Millennials and Gen Z accumulate stock market gains through another means – perhaps even an AI?

There are AI resources on the stock market already. Robo-advisors manage portfolios just like humans, which leads everyone to wonder who will shine in fintech in the future. Is the move toward AI in the stock market an inevitability humans invested in out of sheer ease, or is it necessary now to keep up?

How Robo-Advisors Work

Robo-advisors, or robo-investors, are entities that perform artificial intelligence stock trading. Since AI uses machine learning to become more competent as it collects data, it only makes sense that it would be adept at managing investments. Looking at historical data, it can run those figures against present data input, allowing it to:

  • Make informed investment decisions
  • Predict stock market fluctuations
  • Sell stocks automatically based on historical rates
  • Track irregular patterns and trends for traders

There are other ways AI is implemented into the stock market. For example, companies use it to detect suspicious activity. With numerous trends, such as cryptocurrency and day-trading apps, and wider access to stock market knowledge, general trading activity is on the rise just as much as malicious activity.

The versatility of AI in the stock market furthers its usefulness as it becomes almost a necessity in the modern era with the amount of movement and data to monitor. It could help a veteran investor or a startup attempting to create a new company, using AI to complement a growing employee base.

How Humans Brokers Compare

One essential note is that even though humans have a hard time keeping up with all of the incoming data, AI isn’t perfect at completing this task either. Though the past can help predict what kind of influences affect market fluctuations, AI cannot be 100% accurate in predicting external human behavior. In this regard, humans have the upper hand.

When AI financial forecast experiments were run, it demonstrated no algorithmic model was optimal with a single execution. This highlights why human input is so important. A continuous feed of inaccurate data, skewing results and causing the AI to think it is more successful than it is, could ruin investor portfolios and misrepresent market figures.

AI can use historical data, but it can also aggregate data from contemporary resources like social media and news outlets to make determinations. Humans can perform this action, but probably not as efficiently since humans can only consume so much information at once and do not have the processing speed of AI.

AI and human intelligence help advise investors based on risk and reward metrics. AI may be better at predicting these with actual numeric values via algorithms. This reduces stress more tangibly for investors than humans could provide. However, though it’s crucial to predict and track metrics, the real value comes from interpreting what the metrics actually mean — and that’s where humans still have an edge.

How AI Benefits Stock Market Users

Whether it benefits the stock market as a whole, investors, or brokers, AI has a variety of influences. Apart from using data to predict trends, it saves humans time and money. Investors save time from scheduling meetings with brokers and from workers having to serve a large client base.

Both the broker and investor sides can spend more time doing market research or finding ways to innovate the industry. This is especially important now as AI-powered EFTs and cryptocurrencies are changing the industry at a rate that is difficult to keep pace with.

AI has normalized speed trading, facilitating instantaneous decision-making so long as investors set strict parameters. This increases yields and saves on monitoring. However, experts suggest plentiful research and awareness instead of relying on AI trading algorithms alone. Users who start with robo-investing without experiencing human brokers may not realize the gains they could have if they sought additional guidance. There is psychological ease, yet a financial detriment in some cases.

It also increases the number of people influencing the stock market, which could be positive or negative. Investing in the stock market isn’t just for the wealthy anymore. With apps and AI making it accessible to invest with just a few dollars, the layperson can access the potential financial freedom of investing. A more diverse range of influence could level the playing field for investors.

AI’s market share could see a $76.44 billion increase by 2025, affecting everything from employer stock ownership programs to individually designed stock plans in a handmade Excel spreadsheet.

Is AI Better Than Humans at Stocks?

Ultimately, AI isn’t predicted to replace human brokers as stock market investors. Though it can automate the process for users, for now, it appears it will offer more of an analytical role. Keeping track of drastic dips and rises and monitoring cybercriminal activity will help investors, experienced and otherwise, as new currencies enter the market and more people become market savvy. AI could command the market in the future, but the relationship is cooperative right now.

Zac Amos is a tech writer who focuses on artificial intelligence. He is also the Features Editor at ReHack, where you can read more of his work.