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Money Magazine: Technologies to reduce human error in investing

In the News

Published on 2 February 2022

By Tui Eruera

Technology may be changing the way we manage our money. But it doesn’t always change our money mindset. But tech innovations – including artificial intelligence (AI), are helping us overcome the emotional side of investing to make better decisions.

Psychologist Phil Slade, says, “I don’t think you can ever fully take the emotion out of investing. But money management apps definitely bring an element of data analysis that help reframe the decision inputs and therefore take a lot of fear out of the unknown.”

The catch is that we can still let emotions override our head when it comes to investing. Slade adds, “It can be very difficult to tell in the moment whether your emotions or cognitive biases, are driving decisions in the face of a better, more rational decision.”

Tui Eruera, CEO and founder of Jaaims, a trading platform that uses artificial intelligence (AI) to help investors select stocks and time trades, recognised this problem some time ago. 

He explains “Investing is a psychological process that sees us deal with our emotions. That’s because money is at stake, and the thought of losing money applies pressure to us.” 

Eruera believes a handy starting point to reduce emotionally-driven errors in investing is to use an app that supports a personalised investment plan. He notes, “A lot of people  don’t make a plan for their investments. But a good plan lets you understand what you’re trying to achieve and helps you stay on track.”

Even so, the challenge can be eliminating the emotional biases that cloud our judgement when it comes to stock selection.  A recent Deloitte report [1] found professional investment firms are increasingly employing AI to make faster, smarter and more profitable decisions. And new technology is now available that lets ordinary investors follow their lead.

Launched in 2020, Jaaims is a first for the Australian market. It uses the power of AI to continuously analyse millions of social media and market moving news feeds, then overlays this data with stocks that demonstrate strong earnings and growth potential. Moreover, Jaaims updates all this data every 15 minutes.

Eruera sums up the platform, saying, “Jaaims looks at the data, and suggests a stock without bias or emotion.” 

Tapping into AI doesn’t have to mean handing over control of your portfolio to a machine. “We have investors who access Jaaims’ free buy and sell recommendations to shape their portfolio,” says Eruera. “Others prefer to use our ‘Smart’ portfolio for an automated set and forget investment experience.”

The question is, how has Jaaims’ shaped up for returns? Not too badly at all. The Smart portfolio has notched up returns (net of fees) worth 26.56% since inception on 1 July 2020.

Can technology completely reduce human error in investing? Slade says, “While the simple presentation of data and different digital behavioural nudges can significantly improve decision making and reduce emotional reactivity, completely eliminating emotion should never be the goal.” After all, if we didn’t care about our money, we wouldn’t invest in the first place. 

[1] Artificial intelligence: The next frontier for investment management firms

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