How to use artificial intelligence to invest well and manage your portfolio

invest well and manage

Artificial intelligence ( AI) is expanding throughout all sectors of the economy, with a forecast of 200 billion invested in this technology by 2025, according to Goldman Sachs. And, one of the most transformative is the financial services sector, as portfolio managers are starting to use generative AI tools to help them collect and analyze data in search of the best returns.

If big funds are using generative AI, why wouldn’t you use it to achieve higher returns?

The reality is that for the financial sector, AI can help in different business areas, such as customizing products to customer needs, automating back-office operations or managing risk and fraud. However, one of the most interesting options is the possibility of improving the decision-making process in investment portfolio management, since it can help identify opportunities for buying and selling shares.

How to use AI to manage an investment portfolio

AI tools are very important in trying to generate alpha, that is, outperforming our benchmark. For example, if we seek to invest in Spanish companies, the reference index will be the Ibex 35, so any return we achieve above the Ibex will be alpha. All professional investors have already incorporated these types of solutions, so individuals should also start using them to look for that alpha.

First, AI helps select stocks. Stock markets handle millions of pieces of information about assets that investors want to buy or sell, so deciding between the millions of stocks out there can be chaotic. This requires the use of ‘stock screeners’, so you can start using those that incorporate AI to display data, and graphs or have innovative ways to interact with the user with generative AI like ChatGPT.

An innovative ‘stock screener’ is FinChat.io, which has a chat that allows you to write questions and get answers ChatGPT style. For example, in its free version, you can ask it to compare the latest annual results of Meta (Facebookand Alphabet ( Google ).

Thus, if you are interested in investing in one of these two technologies, you can simply write to organize the desired information to do your analysis and decide to invest in one or the other company. In this way, this tool can save time searching for data on the websites of these companies and collecting it. This was an answer he offered when purchasing Meta and Alphabet: “Meta Platforms, Inc. has a higher operating margin of 34.41% compared to Alphabet Inc.’s 27.42%. This indicates that Meta Platforms, Inc. has been able to generate higher revenue growth and maintain a higher operating margin compared to Alphabet.”

A good tool to get graph visualizations is Finviz. In its free version, this tool allows us to use various filters to create graphs that help us identify stocks that fit our investment objectives. For example, you may be asked to search for companies in the technology sector, that are X percentage below or above your target price, and that are in a market capitalization range, among other filters.

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