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AI revolution: private investors rely on smart investment advice!
Artificial intelligence is revolutionizing investment advice. Private investors benefit, but must consider risks and limits.
AI revolution: private investors rely on smart investment advice!
A lot has happened in the financial world in recent years, largely thanks to advancing technology. Artificial intelligence (AI) has established itself as a hot potato in the area of investment advice. More and more private investors are using AI tools to make their financial decisions. But what does this actually mean for investors? According to AZ online Around 13 percent of those surveyed are now actively using these technologies. In one survey, almost 50 percent could imagine using AI to help them select stocks.
In the UK, figures show that 40 percent of respondents have already had experience using chatbots for personal financial advice. This corresponds to a trend that is sweeping across the Atlantic: the robo-advisory industry is flourishing and sales are growing at a breathtaking pace. Estimates suggest the market could jump from $61.75 billion in 2024 to over $470 billion in 2029 – an increase of around 600 percent!
The benefits and risks of AI
What makes AI so attractive? Well, it enables rapid analysis of financial data and provides recommendations for action that were previously only available to large banks. As Portfolio Concept explains, AI-powered advice not only offers cheaper and faster options, but also enables a more objective approach to investing. This makes them particularly interesting for private investors, who often have more financial flexibility.
But there are also reservations. Experts warn against excessive dependence on AI systems, as their results depend heavily on the quality of the data and inputs. They may also provide incorrect information or rely too heavily on historical price developments. The AZ online highlights that backtests to ensure the quality of investment strategies with AI are only possible to a limited extent. This could pose a serious risk for investors.
Artificial intelligence and discrimination
Another aspect that should not be lost sight of is the potential for discrimination by automated systems. BaFin has pointed out that discrimination risks can be amplified when applying AI and machine learning in the financial industry. This applies to both direct and indirect discrimination that can arise from algorithmic decisions. To prevent these dangers, financial service providers must introduce strict verification processes.
The European AI regulation, in force since August 1, 2024, aims to mitigate such risks and requires transparent data governance. This alone shows how important it is that there is human oversight when using these modern technologies.
In summary, AI-powered solutions have the potential to revolutionize the way we invest. However, one should not rely solely on these technologies. The combination of human expertise and AI could be the key to more successful investments. Because—as I said—a good hand in investing will always remain important.