ROAD TEST: ‘I tried AI investing to see if it actually works. Here’s what I learned.’

In the News

Publish Date: 27th January 2022

By Nick Dalziel

Can AI help you make better investing decisions? We asked Nick Dalziel, a keen everyday investor, to put AI investing app Jaaims to the test:

I remember one lecture from the only finance subject I did at uni. The lecturer quoted a stat: 88 per cent of Americans think they’re safer than the average driver. The takeaway from this? No matter how safe we might think we are, all of us have blindspots.

This phenomenon permeates the investing world. We’ve all let our emotions and biases get in the way of rational decisions.

It’s why we hold onto a stock that’s doing well, because surely it will keep going up, right? Or we don’t sell a stock that’s tanked, because it’s just a bump in the road and it’s about to turn around.

Artificial intelligence (AI) opens a realm of possibilities to overcome cognitive biases. Jaaims’ AI technology promises to save time and reduce the human frailty in investing.

I recently road tested the just-launched Jaaims 2.0 AI Investing app, an automated online trading app for both new and more sophisticated investors. It allows you to trade in over 1000 stocks, and 10 ETFs, which the AI technology can select based on its own analysis. The AI essentially does the deep research work most of us don’t have time to do.

Let the Jaaims begin…

After downloading the app on my iPhone I was given a list of tasks on the home screen to get up and running, such as account verification and connecting a broker. Users can also book an introductory meeting with a Jaaims representative to help get set up properly.

There are a few different brokers on offer, and a comparison of fees for each. If you’re already using one of the connected brokers you can link your account in.

Putting together my portfolio

There are 1000 stocks on offer, selected from Australia, Germany, the UK and the US.

On first impressions, I noticed a few NASDAQ stocks which have been quite prominent in the news weren’t there. Maybe the AI knew something I didn’t?

This may be why: Jaaims’ analysis team selects stocks according to specific criteria. The main aim is high liquidity, to lower risk and make it easier to enter or exit a stock at a favourable outcome.

It also looks for stocks with enough data to be properly analysed by the AI. Essentially, this means that the companies available to invest in are some of the largest in the world, and they’ve been around for a long time. If you want to invest in Tesla, then other platforms give you that option.

Stocks are held for 16 days on average, which is why liquidity is important. For a full-time worker like me there’s no way I could keep abreast of the news to be a day trader.

The AI technology, which analyses more than 10 million pieces of content daily from across 250 news sources, derives buy and sell recommendations and acts accordingly. So it saves a lot of time and research.

To test it out for this review, I set up a demo account with Saxo Markets, which gave me $100,000 ‘play money’ to test the waters. Just as well – the week I joined up turned out to be one of the worst weeks on the markets in the past few months!

Portfolio options

There are three levels of portfolio automation. The ‘freemium’ option involves a user adding stocks to their watchlist and selecting how much they want to invest in each stock. The AI then picks an appropriate time to buy and sell.

You can opt to pre-approve each trade, or let the AI sort it out.

The second level of automation (Standard) allows you to invest in stocks that fulfil certain pre-set criteria.

Normally I trade in Aussie stocks, with a mix of growing tech stocks and blue chips paying good dividends. It was great to see a lot of these stocks on the Jaaims app. When I have time, I spend a few hours a week reading about stocks, and I try to decipher Morningstar analyses through my brokerage platform.

With Jaaims, the research had been done, and I could narrow down the options by investing in sectors such as high growth and high income, or going for a balance between the two much like my human-controlled portfolio.

In the end, I left Jaaims to do all of the work and opted for the fully automated Smart Portfolio, which targets an annual return of 10 per cent, per annum. It leaves the AI to pick among the 1000+ stocks with options to narrow criteria according to markets, sectors and ESG risks.

One small bugbear was the inability to explore other portfolio options once one was selected. I wanted to see what else there was available, but could only do so if I withdrew from the Smart Portfolio. An update to the app should fix that.

Ethical investing

Users can exclude ‘sin stocks’ which are deemed an ESG risk, such as tobacco, coal or palm oil. Within the app you can research companies and look under the sustainability tab to assess their ESG performance, in the Research section.

This section also allows you to analyse other fundamentals, if you’re the kind of investor who doesn’t mind a balance sheet. Having only done one finance subject, I’m more comfortable leaving it to the experts.

My verdict: Stops losses before they start

I hedged 15 per cent of my portfolio with an ETF, which is recommended if you are seeking a longer-term investment and want to diversify.

The week I signed up was one of the worst weeks to start investing. Global stocks were hammered. Fortunately, the AI did not buy any stock other than the ETF so I wasn’t exposed to a bearish market. As a human, if I had started investing this week, I would have made it to Wednesday and tried to buy the dip, only to see it dip further!

Jaaims gave me great insight into the power of AI, and hopefully it will see opportunities in coming weeks.

While I know I’m a safe driver, when it comes to investing I can see how my biases often get in the way. The ability to trade rationally and take human biases out of the equation is a great option.

View original article: https://www.ymyl.com.au/jaaims/

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