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From quickly analyzing vast data sets to powering automated investing to providing personalized recommendations, artificial intelligence (AI) is fundamentally changing the speed and accessibility of investing.
But using AI to invest also has its share of risks, as its complexity may sometimes be understated or glossed over by eager proponents. Weighing the advantages and disadvantages of this technology can help you decide if AI-guided investing makes sense for your financial plan.
Key Points
• AI investing tools rely on algorithms and machine learning to provide information that may help investors personalize and diversify their portfolios.
• There are multiple ways to use AI for stock investing, including via robo-advisors, stock screeners, and risk management tools.
• One of the biggest risks of using AI to invest is accuracy; AI tools are only as reliable as the underlying data they base their analysis on.
• Investors should be aware of the possibility of AI bias, which is when data output is biased as a result of skewed or unrepresentative data sets.
• Balancing AI with help from an advisor may help investors benefit from extensive data analysis as well as a professional’s strategic and empathetic judgment.
What Is AI Investing?
AI investing tools and systems use algorithms and machine learning to analyze market data, identify opportunities, and complete trades. AI investing tools may do one of these things or all of them — what ties them together is the reliance on artificial intelligence to help inform investment decisions.
Robo-advisors and stock pickers are two examples of AI-powered investing tools. One is a form of passive investing, while the other is designed for active investors.
• AI robo-advisors rely on algorithms, often in combination with portfolios built by specialists, to provide investment options based on an investor’s risk tolerance, time horizon, and goals. Investments are rebalanced automatically to maintain the investor’s preferred portfolio allocation. Robo investing may involve human input, but once an investment strategy is developed, AI generally automates portfolio management.
• AI stock pickers use machine learning and natural language processing to analyze large data sets for specific trends. Investors then receive recommendations on stocks to buy or sell, based on the findings. AI stock pickers may merge technical and fundamental stock analysis to provide information in a fraction of the time of traditional research methods.
Using AI for stock trading means you can choose which approach to take, based on whether you prefer to be more hands-on or hands-off with your portfolio.
Deep dive: What Is a Robo Advisor?
How AI is Changing the Investment Landscape
AI’s integration into the investment landscape is happening on multiple levels, though there are some clear trends in AI investing to be aware of.
A growing number of financial advisors, financial planners, and wealth managers, for example, are utilizing automated investing tools to help develop financial plans and build client portfolios. At the individual investor level, AI tools may make it easier to identify market trends through pattern recognition technology. Some AI platforms even allow investors to create custom algorithms that recommend when to potentially buy or sell specific investments, though investors should always take any additional or personal information into account before making a trade.
AI investing has enormous possibilities, but it has limitations as well.
What AI Can Do
If you’re interested in learning how to invest using AI, it’s helpful to have a realistic view of its capabilities. AI tools are equipped to:
• Analyze vast amounts of market data in much less time than it would take a human to analyze the same information.
• Identify historical patterns and trends based on that analysis.
• Offer investment recommendations based on your goals, risk tolerance, and age.
• Help rebalance portfolios to maintain the desired asset allocation.
• Monitor market conditions in real time.[1]
Speed aside, the above tasks are things a human financial advisor can help with. The difference is that using AI for investing is generally more affordable than a human advisor. That said, a human advisor can offer strategic and investment recommendations that are tailored to your own unique circumstances and goals, while also offering emotional support.
What AI Can’t Do
AI-guided investing is still relatively new, and there are places it can’t take investors — yet. For instance, AI investing tools cannot:
• Employ emotional and contextual intelligence to inform investing recommendations
• Help an investor navigate complex circumstances
• Verify its own information is free of hallucinations and appropriate for an investor
• Make stock predictions with 100% accuracy (as this is impossible)
• Predict black swan events in the market
• Decide on an appropriate investing strategy for an investor
One of the biggest flaws associated with using AI to invest is that the results you get are entirely dependent on the quality of the data being processed. If an AI investing tool has incomplete or incorrect data, that could skew results and lead to recommendations that don’t align with your investment goals.[2]
And of course, AI can’t talk you down when panic sets in over market volatility. A human advisor, on the other hand, can help you navigate periods of uncertainty and help you determine whether your portfolio is appropriate for your circumstances.
Benefits of Using AI for Investing
There are some potential upsides to AI-powered investing. Here’s what AI investing tools bring to the table.
• Speed: AI’s superpower, if you will, is being able to digest large amounts of data at lightning speed. AI tools may analyze market data in seconds that might otherwise take you (or your advisor) hours or even days.
• Scalability: Scalability refers to how easy it is for something to expand. In the context of investing, AI tools can help financial advisors serve a greater number of clients and do so more efficiently. Individual investors, meanwhile, may use AI to conduct broader stock analysis than they’d be able to do on their own.
• Less emotional bias: AI tools are not clouded by human emotional and behavioral biases. Instead, they generate investment recommendations based on the data that’s available to them. Using AI to invest could help you maintain discipline when volatility sets in, though again, AI lacks the human touch you’d get with a financial advisor.
• Cost efficiency: We’ve already touched on financial advisor fees. Overall, fixed-percentage fees average about 1% annually. AI investing tools can often help you put together a complete portfolio for a fraction of that cost. That allows you to hold on to more of your investment earnings.
• A level of personalization: Using AI for stock investing doesn’t mean you have to follow a one-size-fits-all approach. While AI investing tools may not offer the same level of personalization as a financial planner, they rely on your input to guide you toward an investment plan that reflects your needs and goals.
AI Investing Risks and Considerations
AI is an imperfect technology, and no discussion of its benefits is complete without covering the potential risks. Lack of transparency, lack of human guidance, data privacy, and bias[3] are some of the chief concerns surrounding the use of AI for investing.
Lack of Transparency in AI Models
If you’re using AI for stock investing, it’s important to have insight into how a particular tool works. More specifically, you may want to know how that tool determines which stocks to recommend and why.
Some AI tools may be more transparent than others, however. A lack of transparency can make it difficult to gauge whether the investments being made on your behalf are the right ones for you.
Overreliance and Need for Human Oversight
Leaning too heavily on AI tools for investing (or anything else) can become a problem. For example, building an investment portfolio based solely on artificial intelligence may introduce its own set of risks. A research analysis of AI use in educational settings found a possible link between increased reliance on AI and diminishing cognitive abilities in the areas of critical thinking and decision-making.[4]
In other words, there’s the possibility that using AI to invest could cause you to develop blinders and screen out other helpful sources of information. Working with a human advisor or using AI tools that are guided by human oversight may help reduce the possibility of your financial plan becoming too reliant on algorithms.
Data Privacy and Protection
Cybersecurity is always a concern when managing financial accounts online. If you’re using an AI tool or platform for investment decisions, that tool should be a secure one.
When evaluating AI investing tools, consider:
• What data is collected from you
• How that data is stored and who has access to it
• What measures the developer takes to identify and defend against potential data hacks (e.g., encryption)
• Which third-party vendors may have access to your data
Transparency matters here as well. A reputable AI company should be completely transparent about how your data is collected and used, and what steps it takes to prevent breaches.
Platform Trustworthiness and Algorithmic Bias
Reputation matters when deciding which AI platform or tool to invest with. Reading user reviews and checking the investment company’s Trustpilot or Better Business Bureau ratings may offer insight into how reliable and trustworthy it is.
The potential for algorithmic bias is also something to be aware of. This can occur when an algorithm is trained on data that is biased and excludes key data points[5] that may better reflect market conditions. For example, a biased algorithm may recommend specific investments to you based on your age. That can be a problem if the underlying data is biased in a way that makes assumptions about people in your age group that do not reflect your unique financial situation.
6 Ways You Can Use AI to Invest
While AI investing is quickly evolving, AI is not entirely new to the investing world. Investment firms have been using machine learning and algorithms to analyze data and understand risk for a number of years, and so it’s possible and perhaps even likely that many investors are already benefiting in some way from AI.
However, if you’re ready to explore investing using AI, there are several ways to do it. We’ve already mentioned AI robo-advisors and stock pickers, but you may be interested in other routes that may help you build a diversified portfolio. Here are some beginner-friendly options if the AI landscape is unfamiliar territory for you.
1. Use a Robo-Advisor to Automate Your Portfolio
Robo-advisors use algorithms to select investments for you, based on your goals and risk tolerance. You typically complete a questionnaire, and the algorithm uses your responses to recommend a portfolio strategy.
Depending on the tool you use, the algorithm may automatically rebalance your portfolio which helps keep your asset allocation aligned with your goals. Some robo platforms may also offer limited access to a human financial advisor or include automated tax loss harvesting, which may reduce what you owe in capital gains tax. (Be aware that SoFi does not offer tax loss harvesting at this time.)
You’ll pay an advisory management fee for these services, which may be anywhere from 0.20% to 0.85% annually. Some robo-advisors may charge no fees for assets under a certain threshold, which can be a plus if you’re looking for a low-cost way to explore AI investing tools.
2. Screen Stocks Based on Predictive Analytics
AI stock screeners use machine learning to analyze stocks and make predictive forecasts about performance. These screeners rely on:
• Fundamentals and financial data
• Company earnings reports
• Historical patterns and trends
• News and social media reports
These tools can perform real-time analysis to try to identify trading opportunities as they arise, though it’s also important to keep in mind that it’s impossible for any tool (or human) to predict future market performance.
Recommended: Top AI Stocks by Market Cap (2025)
3. Build a Diversified Portfolio With AI-Driven Risk Management
Risk management is an important component in any portfolio. Too much risk or too little exposure to risk can directly affect outcomes and your alignment with your overall goals. Diversification is a common tactic for lowering your exposure to risk in your portfolio.
AI investing tools may analyze your current asset allocation and offer recommendations on how to increase diversification across different asset classes, sectors, and geographies. Depending on the tool or tools you use, you may have access to:
• Portfolio optimization strategies
• Stress-testing and modeling
• Scenario analysis
• Real-time market monitoring
• Tax optimization strategies
Using AI to invest can make diversification seem less daunting. Modeling and visualizations can help you understand potential outcomes before you move any assets around.
4. Get Personalized Investment Suggestions Based on Your Goals
Portfolio building is personal, and the advice or recommendations you receive should be tailored to your situation. While an AI-driven investing platform will likely not offer the same degree of personalization as a human advisor, AI investing platforms may offer investment suggestions (such as certain ETFs, sectors, or asset mixes) based on your personal information and goals. Recommendations are typically based on a mix of factors:
• Age and time horizon
• Financial goals
• Risk tolerance
• Risk capacity
If you’re unsure of the difference between those last two terms, risk tolerance is how much risk you’re comfortable taking. Risk capacity refers to how much risk you are able to take on without jeopardizing your investment goals.
AI investing tools can use your inputs in each of these areas as a guide to build your portfolio. Some models can monitor investor behavior and make recommendations to reflect shifting goals or risk tolerance.
5. Analyze News and Sentiment at Scale
Market sentiment refers to how investors feel about the market at any given time. Sentiment analysis is an important consideration when trading because of the connection between investor emotions and behavior.
AI investing tools can scan the latest news, social media posts, financial research, and other sources to analyze data about market sentiment, sometimes in seconds.
That can be invaluable if you’re an active trader. Market sentiment can turn at a moment’s notice. The more attuned you are to it, the better positioned you may be to determine your trading strategy. That said, AI is dependent on its data sources and it’s important to be aware that it may not always interpret market sentiment accurately.
6. Monitor and Adjust Your Investments Automatically
Tracking your portfolio can be time-consuming, and often a little nerve-wracking if there’s an uptick in volatility. AI tools can track performance and market conditions in real-time, so you don’t have to stay glued to your device.
These tools can go a step further and handle automatic portfolio rebalancing to help keep your asset allocation on target. You can also set up alerts so you’re notified when a particular investment or sector experiences significant pricing fluctuations. That allows you to adjust your portfolio as needed, without constant hands-on monitoring.
The Takeaway
Using AI to invest can save time and help you make more informed decisions about your portfolio. Awareness of AI’s risks, plus a comprehensive investment strategy, can help you find the right balance of relying on AI investing tools, working with human advisors, and potentially leveraging your own research as you build a plan that aligns with your goals.
Ready to start investing for your goals, but want some help? You might want to consider opening an automated investing account with SoFi. With SoFi Invest® automated investing, we provide a short questionnaire to learn about your goals and risk tolerance. Based on your replies, we then suggest a couple of portfolio options with a different mix of ETFs that might suit you.
FAQs
What’s the easiest way for me to start using AI for investing?
One of the easiest ways to start using AI to invest is to let a robo-advisor do the work of managing your portfolio for you. You can choose from custom portfolios that reflect your goals and risk tolerance. If you like, you can invest automatically with recurring contributions.
How does AI help me choose investments?
AI tools use machine learning and natural language processing to analyze data and identify patterns or trends in stock movements. These tools may combine data analysis with input from investors regarding their age, risk tolerance, and goals to develop personalized investment recommendations.
How can I be sure the AI’s recommendations are reliable?
Any recommendations you may get from an AI investing tool are only as reliable as the underlying data they analyze. Transparency matters, and that’s why any AI platform or tool you decide to use should clearly explain how it sources data and what safeguards it uses to help ensure that data is accurate and unbiased. It’s important to remember, however, that no investing tool or human can predict price movements or market outcomes with certainty.
Is my data safe with AI investing tools?
AI investing tools typically have built-in protections to keep your data safe, and FINRA has privacy rules that investment firms must follow independent of the technology they use. Again, look for transparency when comparing AI investment platforms and avoid companies that offer little to no explanation about how your personal data is stored or used.
Can AI predict the next stock market crash?
No investment tool, whether AI-powered or not, can predict the next stock market crash with 100% accuracy. AI investing tools perform analysis, similar to what a financial advisor does — but faster. Diversifying your portfolio and paying attention to market trends may offer some protection against the worst impacts of a market crash.
About the author
Rebecca Lake
Rebecca Lake has been a finance writer for nearly a decade, specializing in personal finance, investing, and small business. She is a contributor at Forbes Advisor, SmartAsset, Investopedia, The Balance, MyBankTracker, MoneyRates and CreditCards.com. Read full bio.
Article Sources
- Investing.com. AI Stock Trading: How Artificial Intelligence Can Revolutionize Your Stock Picking.
- Data Ideology. AI Data Quality Matters—Bad Data Leads to AI Failure.
- CFA Institute. AI Bias by Design: What the Claude Prompt Leak Reveals for Investment Professionals.
- SpringerOpen. The effects of over-reliance on AI dialogue systems on students’ cognitive abilities: a systematic review.
- IBM. What is algorithmic bias?.
Photo credit: iStock/mapodile
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