Investing Today — My Way or AI Way?
All my life, I’ve dealt with two kinds of investors. The ones that go by their gut, and the one’s that go by their brains. I have little to fear from — or for — the former. They aren’t going to change. Catch a hot tip here, or let a personal emotion trouble their investment calls. But I do worry for the second kind, the nerdy ones, who once had complex spreadsheets occupying more than one screen. Now they get excited over ‘trends’ and ‘projections’ and ‘cadences’ thrown up by a cute little app on their phones — tied to some mega AI server in California, crunching trillions of bytes every second.
I’m no Luddite. Artificial intelligence is here to stay, and day by day, it is changing the investment game. I can’t challenge its ability to analyze vast amounts of data and provide actionable insights — so I am going to make it a friend. A friend mind you, not my master. Let me lay out the difference.
There are advantages of using AI in Investing…
AI-based tools bring several benefits to the table, simply because they process and analyze large volumes of data quickly. We’re surrounded, nay flooded, by the kind of data that our predecessors would have paid top dollar for: historical market data, breaking news, earnings reports, and even social media trends. AI identifies trends and anomalies that are invisible to our decidedly non-statistical brains. Predictive analytics tools, that get better and better with machine learning (as opposed to our very human biases) detect subtle correlations between variables, forecasting some stock price movements with high accuracy. For short-term trades and for those capitalizing on market inefficiencies, it’s awesome.
For the same mega-giga-peta number-crunching reasons, an AI tool is better for risk management by analyzing historical market data, volatility, and potential corrections. And it’s only getting better at forecasting accuracy, capturing nonlinear relationships between risk factors and other variables. 2025’s tools are a generation ahead of, um, 2023’s tools, while our human capabilities haven’t budged. And for those who like the adrenaline rush of high-speed trades (not me, though), AI gives you the ability to digest bid-ask spreads, sentiment analysis, and early signals of market shifts to give you a clear trading algorithm.
Where I am really pleased with is the automation of routine tasks, all that portfolio rebalancing, tax optimization, etc., etc. I am more than happy to AI do it. It saves me time to do some reading, reduces the likelihood of errors, and takes out the boring bits of the trading life. Then there are all those personalized recommendations: sometimes it sets you thinking about an industry or company that may have missed your mental radar.
Some say that AI-powered robo-advisers and finance apps are democratizing investment by making professional financial insight and portfolio management accessible to everyone. I agree that the lower the entry threshold, reducing investment account minimums and fees, while offering some mind-bending features like tax-loss harvesting and periodic rebalancing. Surveys show that 31% of Gen Z and 20% of millennials now use these platforms.
But there is a flipside, isn’t there?
I’ve been in the market long before some of GenZ investors have been on the planet. So I can see the limitations that the younger lot don’t really see (or are too enamored to see?).
Here’s a fundamental issue: your AI tools rely on historical data to make predictions. Remember that disclaimer that use to flash on mutual fund TV ads, “past success is not a guarantee of future performance”? I’m not sure the tools are giving our investors that caveat often enough, even though market conditions can change abruptly due to unforeseen factors such as geopolitical events, regulatory shifts, or technological disruptions.
One thing that human investors got right tht AI didn’t? The rising stock of companies like Cochin Shipyards and Mazagon Docks. Humans could connect the dots between these companies and India’s recent defence indigenization push. That sort-of-non-linear thinking between the PM’s statements leading to strategic priorities leading to investors seeing that CSL or MDL were sitting on a goldmine — especially when their historical trends were moribund. Similarly, AI tools often fail to account for qualitative factors, such as leadership quality, innovation potential, or brand strength.
Another thing to question? AI tools can’t figure your investment goals and risk tolerance. They can optimize portfolios based on your inputs, do they have the full contextual understanding that only exists in your head? For instance, you know you have your wedding coming up in 5 months and may look to decrease risk appetite, but unless you tell your AI tool explicitly, it’s still operating on an assumption of higher appetite.
At the end of the day, financial markets are influenced by human behaviour, which is irrational and unpredictable. AI models trends nicely, but it isn’t catching the emotional and psychological factors that drive market sentiment. It can be booby-trapped by a ‘Hindenburg’ moment.
We’ve seen the rapid rise of AI-based tools, yes, but we have not seen the law keep pace. So newfangled ethical concerns and potential financial risks that arise have no legal protection. This is especially when the tool’s training data is in a black box. We have no clue what biases it comes with, and however big the training data set used, there is some bias built in. Your trust in technology can lad you down a path of skewed predictions and misrepresented returns.
That’s what I call false confidence — and I’ve seen every advance in technology create that. That’s why I said I fear more for the nerdy types.
The Human Element in Investing
Investing is really an art, not a science. It requires intuition, critical thinking, and the ability to synthesise diverse information. As a few writer friends of mine say, their thoughts become clearer when they start writing them down. They got me thinking — investing works the same way. When you are analysing the graphs and charts your AI tool gives you, along with the invisible context of personal goals and circumstances, you can articulate an investment thesis that sharpens your understanding. When you delegating this process to AI in pursuit of that blockbuster stock tip, that’s when it stops being your friend. You’re no longer think critically or making independent decisions.
Hear the market gong
AI tools are aids, not substitutes. The terms & conditions say that when you sign up, the app store description says that. They are here to streamline data analysis, automate routine tasks, and provide valuable insights — and the gods know we need them for that. But until we get AI agents and more developments (which is sooner than we think), the responsibility for decision-making rests with us. If you blew your child’s college fund on a hot AI tip, who’s going to have to apologize?
Honestly, I remain skeptical of AI-generated predictions. Tools like ChatGPT, Grok, and Gemini 2.0 can produce generalized recommendations based on popular sectors like IT and financial services. These insights aren’t useless, but am I going to take them at face value? That’s the question you should be asking. I see them drawing a lot of people, young and old, into the investing game without knowing how to read a balance sheet. It’s scary.
Let me not end on a pessimistic note. These tools will get better. They can find trends we can’t, and they’ll surely get smarter enough — maybe next month — to start finding the trends they missed. After all, they can process exponentially more than we can. They are the kind of friends we wished we had when we were thirty. If we know how to deal with them, they’ll still be our friends at 90.
