At the end of the day, investments are a form of betting. The only difference between investing and gambling is that gambling relies on random chance by design. Meanwhile, smart investments place a degree of faith in a market element based on informed decision-making.
It is a data-driven pursuit, and the more educated the decision, the more likely it is to bear fruit.
Technology, of course, has noticeably altered the landscape when it comes to making investment decisions. It has improved the accuracy, speed, and accessibility of data, making it easier for the common Joe to make informed decisions. Here are some of the aspects of integrating tech into investments:
Analyzing metadata
As mentioned before, investment technology relies heavily on gathering and interpreting information. However, no matter how accurate a data set is, it should also be representative.
Exceptions and special cases happen all of the time, so if you look just like those, it may alter your perception. And even if you are not analyzing spikes and exceptions, how can you guarantee that your dataset is representative of your entire market niche?
Well, you will need to take a bird’s eye view of the situation. In general, the bigger the data set, the more accurate conclusions that an investor can draw.
In the past, only a select few elites could have access to such information, but nowadays, thanks to technology, the process has become more democratic. In addition, data analysis is an entire field of activity. You don’t read data like you would read a newspaper.
So the best way to actually interpret the numbers is with the use of technology. You don’t have to analyze it manually anymore. Using modern data analytics for investing, it is possible to gather and analyze trends from the entire global market.
It is also possible to keep track of other, more indirect factors such as economic indicators and consumer behavior. Even something as trivial as internet search trends is extremely important to note.
Predictive models and using AI
This goes without saying, but even the smartest among us are still human. We make mistakes or have blindspots, and that can cost us money. Thanks to machine learning in finance, those concerns can be alleviated.
AI catches and sees patterns that a normal person would miss. And it doesn’t just notify you about those trends. It can go one step further and generate predictive models for gold investment firms, crypto trends, stock prices, and so on.
Imagine having a robotic coach that can provide the wisdom of dozens of years of experience in a nanosecond.
“Sure, AI is powerful, but what if everyone is using it, won’t that cancel out the competitive edge?”. Well, it would be in another field of activity. Investment is not a zero-sum game where the winner takes all. Investment is about stimulating productive elements of the market, and if it is successful, everybody wins.
As a final mention, digital asset management is simplified, allowing users to handle larger volumes more precisely.
Tech-assisted trading systems
Using the benefits of artificial intelligence, traders can make a high number of trades based on variables such as timing, price, or volume. AI makes better use of all the relevant variables, resulting in superior trading strategies.
As is the case with everything involving machine learning, human error is brought down to a minimum, and the market is constantly scanned for fluctuations and opportunities.
Let’s face it: there are some very rich traders walking around, and some of them just got lucky, or their intuition steered them right. But when you go on a hunch, or you simply guess right, you will find that success is hard to replicate. One-hit wonders often have trouble making lightning strikes twice in the same spot.
Tech-assisted trading systems can turn success from a lucky fluke to a steady river of positive results and investments. The fact that decisions can be made in microseconds doesn’t hurt.
Investment automation is the way of the future.
Applications
Technology doesn’t just help the rich to get richer. As always, tech has a way of democratizing the playing field.
In the past, there was a clear pipeline toward success in any domain of activity. You had to get into an expensive school, build connections, graduate, get into an internship to learn, and then maybe make some money.
The barrier to entry was very large, especially in the knowledge department.
Today, you can get into trading by simply downloading an application. It has never been easier to build success. Also, there are tons of tips and tricks available online for free for those who wish to do their homework.
It is possible for a middle-class person to become a millionaire if he plays his cards right. Investment portfolio optimization is accessible to everyone who is willing to take a chance.
AI is an Earth-shattering invention, but comparatively low-tech apps, video tutorials, and courses currently help the largest number of people.
There are platforms dedicated specifically to traders communicating and sharing their knowledge. It seems that successful people often get the urge to talk about what made them successful, so don’t pass on the opportunity to listen.
Evaluating risk
From the smallest business to the largest corporation, risk assessment is a crucial factor. Most financial decisions are made based on current and past trends, but the future can often shake things up.
Of course, not even the smartest computer can tell the future, but it can give you the best possible evaluation of risk. There are programs such as VaR (Value at Risk) that specialize in highlighting vulnerabilities in systems of strategies.
This advantage is desperately needed, as the global economy has had major tectonic shifts since 2020.
Behavioral analysis
Investors are people, and no matter how hard they fight to stay objective, you can never fully eliminate the human element from an activity. Trust is just the endpoint, but decisions can be influenced heavily by envy, greed, fear, or biases. There are even regional differences and biases reflected in investment trends.
Machines know how to look for that by analyzing investment trends and patterns and overlaying them on social and human factors.
Conclusion
Technology is a force multiplier in any type of activity imaginable. It won’t do your job for you, and it should be used as an instrument.
Still, those who decide to use it will gain major advantages in decision-making, time-saving, predictions, and portfolio management.