AI Investing Tools vs. Human Advisors: I Put Both to the Test for 90 Days
In the fast pace of the investment world, never before has there been such a critical debate between the use of AI-driven investing tools vs human financial advisors. As technology continues to improve, many investors are left wondering if they should trust their financial futures to an algorithm or the insights of a person. To help us navigate this dilemma, I embarked on a 90 day experiment to compare AI investing tools to human financial advisors. I will walk you through my experiment, results, and lessons learned.
Before I began my experiment, it’s important to know some context regarding AI investing tools and human advisors. AI investing tools utilize innovative technology such as machine learning algorithms and big data analytics to make investment decisions on my behalf. The tools promise greater efficiency, decreased costs and manoeuvrable amounts of data over a quick amount of time.
Human advisors leverage personalized advice and assistance based upon individuals’ unique circumstances, goals and risk tolerance. They can offer investors that human touch that many find comforting, especially in times of turbulence.
To carry out my experiment, I chose a well-known AI investing tool and a professional human financial advisor. I split an equal amount of investment capital between the two, with the goal of seeing how they performed and my overall experience for a specific time frame of 90 days.
The AI Investing Tool Experience
Selection and Setup
For my AI investing tool I went with a well known robo-advisor platform. Before setting up my account, I played around with the platform to see how it worked. The set up and user experience was clean and easy to understand, I connected my bank account, set some investment goals, the platform walked me through everything. To personalize my investment portfolio, the platform created for the “robo-advisor” was based on my risk tolerance, which meant I had to take a risk assessment questionnaire.
Investment Strategy
The AI platform was diversified in nature as it automatically matched my investing preferences with the various asset classes based on my risk profile. It used a portfolio that was constantly monitored for market conditions and was capable of adjusting the portfolio with a risk preference limits while trying to optimize returns.
Evaluation of my performance and the adjustments.
During the entire 90-day period, the AI tool was very agile with changes. It was investing often and monitoring the market so it could earn the most gains and stop the market losses. I would receive daily updates and performance reports in the mobile app which I could monitor readily.
Advantages and Disadvantages
The AI tool’s advantages included its efficiency, fees, and data-driven decision process. The user-experience for me was seamless and with minimal execution effort. The tool did not have the advantage of a personal touch with a human advisor, and there were moments when I felt its decisions, although rational in terms of data, did not fit well with my instincts as an investor.
The Human Financial Advisor Experience
Choosing and Introductory Consultation
With the human advisor I chose a certified financial planner with a successful history. In the first consultation, we spent substantial time on my financial history, current status, and outlook. The questions the advisor asked, and feedback they provided, uncovered more detail than a questionnaire could provide.
Investment Strategy
The advisor provided a customized investment plan which balanced my risk profile with my financial goals. The advisor did what the AI tool could not in which the human advisor included a combination of traditional investments and alternative assets which provides many more opportunities.
Performance and Revisions
Over the 90 days, the human advisor communicated with me regularly, providing market commentary and discussing possible revisions. The human advisor would allow both market data and personal intuition to inform their decisions, and therein were times when the human advisor’s choices were more conservative compared to the AI tool.
Comparative Analysis
Having undertaken the experience in either approach, here were some differences that emerged:
Performance
Overall, the AI tool and the human advisor generated the same returns over the 90-day period. Despite that, there were moments where I thought the AI tool had a slight edge in performance since the tool made rapid adjustments potentially faster than the human advisor’s more leisurely adjustments. Then again, there were instances where I thought the human advisor just had better timing mainly in more volatile markets when it used a mixture of intuitive thinking and personal insight.
User Experience
The AI tool offered an cool without turbo model because it offered a more hands-off experience which might be great for the tech-savvy investor who is more comfortable transacting through a screen. Whereas, the human advisor offered a more engaging experience which was a big value for investors who feel they need assistance and have discussions primarily focused on reassurance.
Cost
Regarding cost, the AI tool certainly had a leg up because the fees were substantially lower based on the automation of the tool. In the case of the human advisor, the fees would be naturally higher due to the personalized service, but may also be unmanageable for some investors.
Emotional and Psychological Support
The human advisor was better suited to offer emotional support. Because I experienced downturns in the stock market and the advisor was able to put things in context for me and reassure me. The AI tool had logic underpinning its analysis and suggestions, but sometimes I think a human perspective is what investors really mind when emotional states are running high.
Conclusion: The Best of Both Worlds
My “experiment” revealed that after 90 days there were advantages and disadvantages to using AI investing tools and human advisors. The best choice ultimately comes down to personal preferences, investment objectives, and technological comfort.
For investors who are looking for efficiency, value, and the propositional advantages of data-driven decision-making, AI investing tools are the best choice. AI investing tools are unmatched in the speed and convenience they provide.
However, investors who are looking for an empathetic ear, personal advice, and interaction, will find that a human financial advisor provides a service that technology will never replicate, as an advisor is better positioned to consider the myriad of subtleties in each personal situation and use those to provide timely advice.
In the end, perhaps the best way forward is to continue to use AI tools and enjoy the efficiency and lower costs as well as anticipate help from human advisors for value in terms of guidance and emotional support. Approaching investing with a hybrid strategy may be the most rounded and comprehensive approach to thinking about investing. As the investing format and styles continue to change, integrating the best aspects of both AI and human will probably be the most effective way for investors to chart their financial futures.
