Why An AI Portfolio Is Better Than A Traditional Fund Manager

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• AI helps everyday investors increase their accessibility to the financial market by automatically analyzing and choosing stocks, bonds, ETFs and other investments based on larger, more diverse data sets.
• Lower fees and investment minimums are reasons to consider a digital portfolio over a human fund manager.
• Click the Follow button above to stay up to date on AI-based investment.

Whether you realize it or not, you probably use artificial intelligence daily. From asking Siri about this weekend’s weather to assisted driving features, artificial intelligence is present in nearly every aspect of our lives — investing is no different. Here’s a closer look at why an AI portfolio is better than one managed by a professional fund manager.

The Limits of Professional Fund Managers

Professional fund managers spend long workdays pouring over stock data, investment models, and other key information to help them decide if a certain stock or other investment belongs in the fund portfolio. This is specific to actively managed investment funds, which work differently than index funds.

While Wall Street fund managers often work 60 or more hours a week, they are still limited by what humans can do. They need sleep and can’t possibly read every bit of news and data on a company the moment it comes out. Humans can only remember and process so much information and can only work so fast.

Humans are better at many jobs than computers, but as artificial intelligence and machine learning improve, that balance will shift away from us. Regarding your stock portfolio, AI is already several steps ahead of anything a human can achieve.

AI Can Do it Better

An AI portfolio can perform better than a professionally managed one because while professional fund managers can only use currently available information in an attempt to outperform the market, AI can utilize big data and scrape the internet to build highly intricate models that predict future market movements with precision.

Specifically, AI portfolios rely on asset allocation models called “cluster models” to aid in this future-oriented thinking. These models take a bunch of stocks and create a scatter plot based on absolute values of the relative risk in the portfolio. These scatter plots are then arranged in a hierarchy. That’s just one type of AI model used in asset management.

Overall, the plots help create a future model focusing not just on the linear relationships between stocks, as most fund managers do, but also on the nonlinear relationships. Ultimately, this reduces a portfolio’s risk and provides new opportunities to beat the market.

Why is an AI Portfolio Better?

Greater Accessibility

Everyday investors may be deterred from actively managed investment funds because those funds typically charge more than popular low-fee index funds. AI portfolios mitigate that problem by enabling everyday investors to jump into the investing world. Q.ai was founded with the mission of helping the average individual access the financial world that was formerly exclusive to all but the elite.

Q.ai provides investors direct access to AI portfolios through collections of investments called kits. Each kit is an AI-driven stock portfolio actively updated based on a wide range of inputs.

Lower Cost and Minimums

Actively managed investment funds charge a range of fees to investors. On the low end, that could be a flat, annual fee. Wealthy investors tapping into the hedge fund market often pay 20% of profits and an annual fee based on their investment size.

Typically, AI portfolios cost much less than their “professionally managed” counterparts. AI funds require a lower minimum investment than many funds alongside lower annual fees. While some popular mutual funds require $5,000 or more to start, AI funds allow investors to buy in at a fraction of that cost.

Greater Security

Human fund managers can only respond to downturns in the market after the fact, their guess is only as good as past performance. As the saying goes, “time in the market beats timing the market.”

AI, however, provides a two-fold risk prevention measure from market volatility and anticipates future investment risk. For example, Q.ai’s Foundation Kits all come with Portfolio Protection, which utilizes AI to implement hedging strategies to prevent losses. Portfolio Protection automatically reallocates funds from potentially risky investments to protect your money, beating the reaction time of a human fund manager.

Outperforms Humans

AI inputs can outperform a human being’s prediction of how the market will move. For example, earlier this month, we discussed how Tesla’s stock split couldn’t fool AI and what the stock splits of Google and Gamestocks may indicate to investors.

Individual investors and other fund managers respond in varying ways. AI can analyze stock market trades and financial data feeds to make near-instant corrections and portfolio adjustments. AI can even analyze sentiment data from news feeds and discussion boards. An edge of a few seconds in automated high-speed trading can make a huge difference.

What to Look for in an AI Portfolio

Some individuals may be concerned about trusting a completely virtual investing system. Here are some things to look for when choosing an AI investing portfolio:

• Diversification of financial securities: AI portfolios can comb the markets for a diverse group of stocks, bonds, ETFs and other securities. More diversified portfolios are better suited to handle risky investment environments.
• Quality of the data inputs: AI is only as good as its data. The best AI portfolios carefully select the data sources used in their models.
• Transparency about portfolio performance: Investment funds must meet certain reporting requirements, but there is still a level of opacity in many cases. Quality AI portfolios make it easy to understand how well your investments perform and how they compare to key market benchmarks.
• Associated fees and minimums: Check if you have to pay any monthly or annual fees for using an AI platform and take note of any required minimums.

The Bottom Line

AI portfolios regularly outperform their human counterparts by providing investors greater accessibility to more diverse stocks, lower fees, and faster response times. You can download Q.ai today for access to AI-powered investment strategies. When you deposit $100, we’ll add an additional $50 to your account. Best of all, you can activate Portfolio Protection at any time to protect your gains and reduce your losses, no matter what industry you invest in.