AI in finance: How algorithms are shaping personal wealth management
New Delhi, Jun 4, 2024
AI continues to evolve, its impact on personal finance management is expected to grow
Artificial Intelligence (AI) is transforming the way people manage their finances, by offering a more efficient, personalised, and secure experience. AI-powered tools have become increasingly popular, providing users with real-time insights, predictive analytics, and automated financial planning.
AI-powered platforms use massive volumes of data and advanced algorithms to evaluate trends, forecast market moves, and provide specialised investment plans. These intelligent algorithms digest real-time data way faster than humans, delivering timely insights that can improve decision-making processes.
Predictive analytics and forecasting
AI’s predictive analytics capabilities have also transformed the way individuals approach investing. By analysing past data and market trends, AI algorithms can forecast future financial trends and outcomes. This enables users to make informed investment decisions, optimise their portfolios, and avoid costly mistakes. AI-driven investment platforms offer a blend of predictive analytics, automated trading, and personalised investment advice, making it easier for novice and experienced investors alike to navigate the stock market.
Personalised financial advice
AI has also democratised financial advice, making it accessible to a broader audience. By leveraging machine learning and natural language processing, AI algorithms can analyse vast amounts of data, including bank accounts, credit history, and spending habits, to deliver tailored financial advice. This personalised approach ensures that every financial decision is informed and every opportunity is optimised.
Talking to Business Standard, Sharda Deepakraj Lala IRDA & AMFI Certified Financial Advisor and founder of Siddhantha Wealth Managers, said, ‘The growth of AI in financial planning represents a substantial shift in personal wealth management, owing to the introduction of intelligent algorithms and quantitative funds. Quantitative funds, or quant funds, use mathematical and statistical approaches, as well as advanced quantitative models, to automate investment decisions and trades. Quant funds seek to minimise presumptions and lower the risk of losses by removing the element of human judgement, particularly in volatile markets. These funds use computer-based algorithms to examine previous data and make strategic investment decisions, focusing on high-quality equities and pursuing alpha, or additional profits.
“Although quant funds may not always outperform in bull markets because of their dependence on past performance rather than forecasting ability, they provide an appealing alternative to standard investment strategies.”
Future of AI in personal finance
As AI continues to evolve, its impact on personal finance management is expected to grow. The future of AI in personal finance will likely involve more advanced predictive analytics, increased integration with other financial tools, and further democratisation of financial advice. As AI-powered tools become more sophisticated, they will play a crucial role in empowering individuals to make informed financial decisions and achieve their long-term financial goals.
[The Business Standard]
