Are AI Investing and Robo-Advisors Right for You? Characteristics and Checkpoints for Those Who Are and Aren't Suited
Summary
Have you ever thought, “I’m interested in AI investing, but I’m not sure if it’s right for me,” or “Are robo-advisors easy for investment beginners to start with?”
However, just because you are an investment beginner does not necessarily mean that AI investing or robo-advisors are right for you.
What is important is not just whether you have investment experience, but “how much of the investment decision-making you want to do yourself, and where you want to leave it to a system.”
In this article, we will organize the characteristics of people who are suited and not suited for AI investing and robo-advisors, and explain the points for judging your compatibility with them.
* “ROBOPRO” is a registered trademark of FOLIO Co., Ltd.
First, a diagnosis:
Are AI investing and robo-advisors right for you?
To consider your compatibility with AI investing and robo-advisors, let’s first check the following items.
□ I want to invest, but I don’t want to spend a lot of time on portfolio management
□ I feel burdened by having to think about all investment targets and asset allocation myself
□ I have little resistance to leaving some investment decisions to a system or AI
□ I don’t want to make my own buy/sell decisions every time the market moves
□ I am thinking about medium- to long-term asset formation rather than short-term trading
□ I can understand that there is a possibility that AI predictions may be wrong
□ I do not think that “AI will definitely make money”
□ I understand that there is a possibility of principal loss
Among the checklist items, the items related to the effort of portfolio management and leaving investment decisions to others are a guide for considering your compatibility with your investment style. On the other hand, it is important to understand the limitations of AI predictions and the possibility of principal loss, regardless of the number of checks.
Also, AI investing and robo-advisors are not the same thing, and the methods of utilizing AI and the scope of automation differ depending on the product or service.
Therefore, it is important not to judge just by the number of checks, but to confirm “why it seems to suit you.”
People who are suited for AI investing and robo-advisors
Those who can easily choose AI investing or robo-advisors are not simply “people who are not knowledgeable about investing.”
The point is whether you find value in leaving some of your investment decisions and portfolio management to a system.
However, the characteristics introduced below are not limited to AI investing and robo-advisors, and may also apply to other investment methods such as balanced funds and fund wraps. The important thing is to compare multiple options and consider an investment method that suits your investment style and goals.
1. People who want to reduce the time and effort spent on asset management
People who are busy with work, housework, or childcare and find it difficult to research investments every day or frequently check the price movements of their holdings can consider methods that incorporate automated management.
Therefore,
“I want to invest. But I don’t want to make portfolio management itself a hobby”—people who feel this way have room to compare products and services that incorporate automated management.
2. People who feel burdened by having to think about asset allocation entirely on their own
In investing, not only is “what to buy” important, but so is the asset allocation of how much of each asset to hold.
For those who think, “I don’t know which assets to hold or how much,” or “I don’t know when to rebalance,” an investment method that leaves asset allocation and rebalancing to a system is one option.
For more details, please see this article as well:
What is automated investing? An easy-to-understand explanation of asset allocation, rebalancing mechanisms, and the role of AI
3. People who can accept that AI predictions may be wrong
This is a particularly important point when considering AI investing.
While AI can analyze vast amounts of data, it cannot reliably predict future market trends.
The actual market may differ from predictions, and just because AI is being used does not guarantee high returns or loss avoidance.
Therefore, for AI investing, people who
think “AI will give me the right answer”
may find it harder to understand the mechanism than those who
are comfortable with the idea of using AI analysis and predictions for investment decisions.
4. People who do not judge investment methods solely on short-term results
Even with AI-driven investing, returns may be lower than other investment targets over certain periods. It is important not to judge whether it is a “success or failure because it’s AI” based solely on short-term results.
How to evaluate the performance of AI investing is explained in detail in the following article.
People who may not be suited for AI investing or robo-advisors
On the other hand, using AI or automated investing is not necessarily a benefit for every investor.
People with the following mindsets may want to compare other investment methods as well.
1. People who want to decide their own investment targets and trading timing
People who want to analyze the market or companies themselves and decide on investment targets and trading timing may find the lack of freedom in automated investing to be a drawback.
Whether you see a benefit in delegating investment decisions itself is one criterion for judgment.
2. People who think that AI can produce higher returns than humans
The fact that AI is being utilized does not in itself guarantee high returns.
It is important to make decisions based on an understanding of where AI is being used in the investment process, rather than simply because it is ‘AI’.
3. People who cannot accept a loss of principal
Even when using AI or robo-advisors, as long as it is an investment, there is a possibility of a loss of principal.
If you cannot accept a loss of principal, even temporarily, you need to confirm whether not only AI investing or robo-advisors, but investing itself, is suited to your risk tolerance.
The methods of utilizing AI and the mechanisms of automated management are explained in detail in the following article.
What is automated management? An easy-to-understand explanation of asset allocation, rebalancing mechanisms, and the role of AI
Are AI investing and robo-advisors the same thing?
AI investing and robo-advisors do not have the same meaning.
A robo-advisor is a service that provides asset management proposals and support online. On the other hand, AI is one of the technologies that can be used for management, and not all robo-advisors use AI.
Also, financial products that utilize AI are not necessarily robo-advisors.
For example, there are also investment trusts that utilize AI-based analysis and forecasting for management.
Therefore,
Robo-advisor does not equal AI investing
AI investing does not equal robo-advisor
Understanding this relationship makes it easier to compare products and services.
The types of robo-advisors and their differences from investment trusts are explained in detail in the following article.
What about the ROBOPRO Fund?
Robo-advisors are not the only option for asset management utilizing AI. One example is the ‘ROBOPRO Fund,’ an investment trust that utilizes AI.
The ROBOPRO Fund is not a robo-advisor, but an investment trust established and managed by SBI Okasan Asset Management.
In the ROBOPRO Fund, advice regarding the allocation ratio of target investment assets is received from FOLIO, and AI-based return forecasts are utilized for asset allocation. Sales materials also indicate a mechanism where AI forecasts the returns of each target investment asset approximately one month in advance and performs rebalancing in principle once a month. In the event of a sudden change in the market, extraordinary rebalancing may also be performed in accordance with AI signals.
Therefore, when considering the ROBOPRO fund,
it is not enough to judge it solely based on the fact that “it uses AI.”
Instead,
it is important to see if the investment philosophy of “using AI predictions for asset allocation and dynamically reviewing that allocation” suits you.
Frequently Asked Questions About Suitability for AI Investing and Robo-Advisors
Are AI investing and robo-advisors suitable for investment beginners?
Being a beginner does not necessarily mean they are suitable for you.
Rather than investment experience, it is important to judge based on factors such as how much you want to delegate asset allocation and investment decisions, whether you can accept the operational mechanism, and whether you understand the possibility of principal loss.
Are robo-advisors suitable for busy people?
For those who want to reduce the time and effort spent on asset management, they can be one option.
However, the scope of automation varies by service. Do not judge based on the word “automatic” alone; check exactly what can be delegated.
Can AI investing help me avoid losses?
Even if you use AI, there is no guarantee that you can avoid losses.
AI predictions may differ from actual market trends, and they do not guarantee future investment performance.
Summary
Whether you are suited for AI investing or robo-advisors is not determined by investment experience alone.
It is important to consider your compatibility based on factors such as whether you want to reduce the hassle of management, whether you want to delegate some investment decisions, and whether you understand that AI predictions can be wrong.
On the other hand, for those who want to make all investment decisions themselves or those who cannot accept the risk of principal loss, this approach may not be a good fit.
It is important to compare services not by “choosing them because they are AI,” but by “whether that investment method suits your personal investment style.”
<Please refer to the link below for investment risks, fees, etc.>https://www.sbiokasan-am.co.jp/fund/553175/
<Please refer to the link below for handling distributors>https://www.sbiokasan-am.co.jp/fund/553175/sales#ancFund
The investment principal of investors is not guaranteed, and investors may incur losses and fall below the investment principal due to a decline in the net asset value. Investment trusts are different from deposits and savings. All profits and losses generated in the investment trust assets belong to the investors.
The fund invests in securities with price fluctuations, such as domestic and foreign stocks, domestic and foreign bonds, domestic and foreign real estate investment trust securities, and commodities. Therefore, the net asset value may decline and losses may be incurred due to the impact of price declines in the incorporated securities, etc. In addition, since the fund invests in foreign currency-denominated assets, losses may be incurred due to fluctuations in exchange rates.
The investment performance posted in this document is based on the past and does not guarantee future investment results. Furthermore, taxes, fees, etc. are not taken into account.
When applying for a purchase, please read the “Investment Trust Explanatory Document (Prospectus)” and the “Document Delivered Before Conclusion of Contract” or “Supplementary Prospectus Document” thoroughly, and please make investment decisions on your own.
Disclosures related to the Financial Instruments and Exchange Act, etc.
SBI Okasan Asset Management Co., Ltd.
Trade Name, etc.: SBI Okasan Asset Management Co., Ltd.
Registration Number: Financial Instruments Business Operator, Kanto Local Finance Bureau (Kinsho) No. 370
Member Associations: The Investment Trusts Association, Japan