Investment Strategy: Is Technology Revolutionizing Your Investment Strategy or Fueling Your FOMO?

As part of the banking industry, I have seen a lot of changes over the past three decades, but the speed at which things are changing now is simply mind-boggling. New technologies and the world of finance and investment are joining forces, and this combination is revolutionizing the way we invest. It is high time we took a hard look at what is happening.

Let’s start with the elephant in the room: artificial intelligence (AI) and machine learning (ML). These powerful tools are no longer limited to science fiction; they are a definitive reality, and savvy investors are rushing to get in on the action. A recent survey revealed that a staggering 71% of young investment professionals are actively seeking experience in AI and MLrecognizing its potential to refine portfolio allocation, generate alpha, and uncover insights hidden deep within mountains of data.

But the problem is that these technologies are a double-edged sword. While they offer unprecedented analytical capabilities, they also carry the risk of amplifying cognitive biases and overconfidence. Investors need to tread carefully and ensure they find the right balance between tactical applications of AI and a deep understanding of its broader business implications.

And speaking of new frontiers, the blockchain revolution has captured the attention of retail investors, who are diving headlong into the world of cryptocurrencies and initial coin offerings. Blockchain technology presents exciting opportunities, but the volatility of new investments in this space introduces substantial risk factors that require careful consideration by investors.

But the disruption doesn’t end there. The influence of “financial influencers” on social media platforms has become a significant factor determining investment behavior, particularly among younger investors. These digital gurus are shaping investment decisions in ways that aren’t always aligned with long-term financial goals. And let’s not forget the democratization of investment tools, courtesy of cloud-based platforms. These tools have empowered retail investors, giving them access to professional-grade analysis and real-time data. But with great power comes great responsibility, as this shift has also raised concerns about herd mentality and amplified market volatility. So where do we go from here? As these technological advancements continue to reshape the investment landscape, it’s crucial that investors approach them with a balanced and well-informed perspective. While these innovations offer exciting opportunities, they also introduce new risks that need to be carefully considered. Thorough research, rational decision-making, and a long-term investment horizon remain essential to navigate this rapidly evolving financial ecosystem. But it’s not all doom and gloom. Top venture capital firms like Sequoia Capital, Andreessen Horowitz, and Tiger Global are leveraging AI to analyze vast amounts of data, identify trends, and find promising deals. In 2023, global venture capital investment in generative AI reached a staggering $21.3 billion, with tech giants like Microsoft and Amazon pumping in a whopping $15.3 billion into companies like OpenAI and Anthropic. And this is just the beginning: investment in this space is projected to surpass $12 billion by 2024. But as with any technological revolution, taking a strategic approach is essential. Investors should carefully assess the potential of AI to transform vertical markets and target business models, ensure ethical and responsible use, and recognize the limitations of these tools to avoid overconfidence.

And the data doesn’t lie: According to the CFA Institute, only 29% of systematic investors currently use AI to develop and test investment strategies, but more than three-quarters plan to do so in the future. What’s more, 64% of investment professionals are currently developing, or plan to, AI and ML skills, and the number rises to a staggering 71% among younger people.

My friends, the investment landscape is changing at a rapid pace and those who fail to adapt will be left behind. But if we embrace these technological advances with a keen eye and a firm commitment to the fundamental principles of investing, we can navigate this brave new world and emerge stronger than ever.

So let’s roll up our sleeves and get the ball rolling, shall we? The future of investing is here and it’s time to seize the moment.

(The author is co-founder and CFO of hBits. Opinions are his own.)