How to use AI for Investing
AI can be a powerful tool when it comes to investing. We explore how and why it may be time to embrace artificial intelligence.
Updated 
9 min. read
What is artificial intelligence (AI)?
It’s hard to talk about technology, these days without mentioning artificial intelligence (AI). Many people know the term but don’t fully understand what it is or how it’s impacting how people save, spend and invest right now.
AI uses millions of data points that are processed and presented in a clear format for the end user. For those still scratching their heads, a simple explanation is that artificial Intelligence is the combination of computer science and data to achieve a simulation of human intelligence.
Businesses from manufacturing to media have incorporated this game-changing innovation to help improve our lives with automation and billions of AI-focused dollars are being used to manage financial services related start-ups and established companies.
“AI [is] allowing banks to build sophisticated models that are more data-driven,” says Graham Taylor, Professor and Canada Research Chair in machine learning at the University of Guelph.
Artificial Intelligence has also changed the way consumers are searching for information, ranging from topics like recipes to trip itineraries. ChatGPT, Perplexity.AI, Google’s Gemini, and Microsoft’s Copilot are the major leaders within the generative AI space, offering easy to access to information in an easy-to-use format.
With the growth in complexity of AI, it’s no surprise that in 2024 we started to witness it being applied across many new industries, including investing.
AI in investing
While AI has a variety of financial applications, it’s predominantly involved with using data to help trigger better decisions about investing, saving and spending. And it does its job more efficiently than before.
Historically, an investor would scour spreadsheets or dig into annual reports to assess a company’s performance. But AI can scan millions of data points – more information than a human would ever be able to process at once – and determine how a company might perform in the future.
For instance, some hedge funds are looking at weather patterns, supply chain movements and traffic patterns to gain additional insights into a company performance. They’re using supercomputers to dig into hard-to-decipher historical data, political events, climate change issues and more.
As new information gets fed into the system, AI can adapt its thinking and “learn” how much, say, a hurricane in Texas impacts energy-sector companies. It then factors that information into its future analysis.
Advantages of Artificial Intelligence in Investing
So how can Canadian investors make use of AI? Some banks, including BMO, are using Amazon Alexa and AI enabled chatbots on social media, to help answer everyday personal finance questions, such as how much $100 might be in U.S. currency or how to activate a credit card.
Other voice-activated programs can tell consumers that their bank accounts need a top-up. Some allow investors to buy stocks by simply saying aloud that they want to add 20 shares of a company to a portfolio. But those examples are just the tip of the financial investing iceberg.
Key advantages of AI in investing include:
Efficient Access to Market Information
As we saw above, AI combs through millions of data points at once, far surpassing the capacity of any human or other machine-type innovation. Effectively, AI has the incredibly valuable capacity to facilitate a much more efficient 24/7 access to market information.
Data Aggregation and Analysis
By leveraging machine learning algorithms, AI helps investors analyze vast amounts of data from any number of sources, including financial reports, SEC filings, earnings calls, news articles, social media posts and current market indicators, in real-time. Able to process large volumes of information much faster than manual methods, AI can seamlessly extract key insights and identify relevant trends, essential benefits to those investing.
Decision Support
Thanks to its access to vast amounts of information, AI – along with expert advice of investment professionals – can help you make investment decisions.
Financial institutions around the world are also leveraging vast amounts of financial data to create more targeted investment solutions for their clients, says Natalie Cartwright, the co-founder of Vancouver’s FinnAI, which builds virtual assistants for financial companies.
“We see it with Spotify and Netflix, where data is used to create personalized recommendations for music or movies,” Cartwright says. “We’ll see that same principle applied in the investment space.”
Learning and Education
AI-powered platforms can provide tailored content that is filled with useful knowledge to help with things like determining investment types and related strategies. BMO InvestorLine’s adviceDirect, for instance, uses sophisticated technology to provide specific investment advice to clients based on their risk profile and other holdings.
And, in 2024, BMO introduced Bili, an interactive ChatBot that uses AI to help investors learn more about Investments options, tailored to their needs.
How to Use AI for Investing
Are you ready to employ AI in your investment activities? The following steps can guide you in the right direction.
Step 1. Determine your investment goals
Whether or not you’re using AI, it’s always important to get clear on your investment goals before embarking on an investment journey. Ask yourself what you’re looking to achieve, whether short- or long-term. Are you saving up for a new home? Want to support your child’s educational aspirations? Determined to set yourself up for retirement success?
It’s also important to ask yourself what your investment timeline look like. If, for example, you were saving for retirement, your next steps may differ depending on whether you were aged 25 or 55.
Step 2. Decide on the types of investments
If you’re a fan of choice, you’ve come to the right place. For some, however, the large number of investment types to choose from – e.g., stocks, ETFs, bonds, mutual funds, GICs etc., – can feel overwhelming. Good news is AI can offer basic information about the different kinds of investments, ensuring your investment choices are more informed.
Step 3. Use AI tools to research the market
As we saw above, there are many AI tools out there to help you gain a deeper understanding of the market and determine in which water you’d like to dip your toes. Now it’s time to leverage that research. ChatGPT, for instance, or Google’s Gemini are popular Generative AI tools that can be put to good use. You can then tap into AI to help evaluate the performance of publicly traded firms or stocks. AI predictions, based on a wide variety of sources, can prove pretty accurate.
Step 4. Buy investments using an investment account
So you’ve determined your investment goals, chosen the investment types that can meet those goals, and conducted your market research. Now it’s time to open an investment account after determining which works best for you and your needs.
For example, BMO InvestorLine Self-Directed is a direct investing platform that allows you to manage your own portfolio. If you feel you need a bit more guidance, BMO InvestorLine adviceDirect is equipped with all the advantages of Self-Directed, with the additional benefit of having licensed advisors to help discuss your portfolio strategy. And then there’s BMO SmartFolio which offers access to a team of industry leading global experts who manage your portfolio saving you time and money.
Future of AI Investing
As AI has become more sophisticated and machines continue to learn consumer habits, we’ll continue to see AI used in all sorts of different ways.
For example, AI has made significant inroads in the digital advice space, says Jason Mars, an associate professor of computer science at the University of Michigan. He’s developed a voice-activated AI personal financial assistant to help people manage their saving and spending. With its data-analyzing prowess, AI can view a person’s entire financial picture – where they spend their money, how much they have in savings, their risk tolerance and investing style – and make recommendations on how they can save more, spend less or maximize their investments.
This would do wonders for do-it-yourself investors who may not need the hands-on approach provided by a real-life advisor. For instance, Mars says that software will be able to connect to your brokerage account and then see what stocks you’re looking at and trading. It might then send you an article about that company that it knows you haven’t yet read. “Then it asks you, ‘Do you still want to make this trade?’” he says.
If you are looking to incorporate AI into your investing today, start by doing a search for programs or software that utilize this technology. Some may use it to give people ideas on what kinds of stocks to buy or how to lower their portfolio’s risk, while others use it to give investors better data and information about a particular stock or investment style.
It’s a good idea to read the fine print. AI still needs to be carefully researched by consumers and many companies have different ideas on what artificial intelligence in finance really means. If the program is analyzing data that humans can’t process, if it’s making recommendations based on your personal information, if a chatbot is able to answer your questions without you having to call a company’s help line, then it’s likely using AI.
Ultimately, the technology will become so sophisticated that it will make saving and investing using AI much easier to do. What it won’t do, though, is force people to save and invest. Canadians will still need to be prudent with their finances and set aside money to put into their investment accounts.
Frequently Asked Questions about AI for Investing
Yes, AI can be used to help pick stocks. Considering the tremendous amount of data available and the overwhelming number of stocks out there, AI can help sort through the information and identify the stocks worth buying or selling.
For the most part, investing with AI is safe. In fact, AI can prove a good safety net, ensuring your decisions are based on current and correct market conditions. Still, AI comes with its risks. If provided with inaccurate data or flawed algorithms, for example, AI tools can make mistakes. Which is why it’s always best to use AI in conjunction with human expertise, not to replace it.
So long as AI is provided with accurate data and meets other criteria, AI can be extremely accurate. Of course, it’s not perfect and, in the face of unpredictabilities, AI can be less precise.
While some believe AI can predict the stock market (and even outperform traditional methods), the jury is still out on that million-dollar question. Since stock trading is so volatile and AI is incapable of adjusting to unexpected events, investors are cautioned to use their due diligence when it comes to researching the stock market.
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Start investing online with BMO InvestorLine Self-Directed.
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