The Rise of AI Investment Apps: A New Era in Investing
It seems like artificial intelligence (AI) has taken over the world in recent months. From generating images to writing emails, AI is now making its mark in the financial sector, particularly in investment. With the rise of AI technology, financial institutions are harnessing its power to create sophisticated AI-investing tools that can analyze the market, spot potential opportunities, and even automate the investing process.
According to a recent report, 31% of Gen-Z and 20% of Millennials are using AI apps to invest, a number that is expected to rise as more platforms begin to offer robo-advisor services. At MoneyMagpie, we aim to make investing easier for our readers, so we conducted research on some of the top AI investing apps to determine if they are truly worth the hype. However, it’s essential to conduct your own research before making any investment decisions. These AI apps are designed to assist your investing, not to take over entirely.
What Are AI Investment Apps?
So, what do we mean by “AI investing apps”? These platforms, often referred to as robo-advisors, utilize machine learning and algorithmic technology to analyze market trends, identify price patterns, and make investment suggestions on behalf of users. They resemble traditional trading apps and are often extensions of established online brokers. For instance, Vanguard has introduced its own robo-advisor that leverages AI to provide market insights to investors.
AI investment apps can either manage your investment portfolio or provide investment suggestions based on algorithmic analysis. If you’ve ever used a managed investment service, such as a stocks and shares ISA, these apps will feel familiar. The primary distinction is that decisions are made by algorithms rather than human advisors.
Once you set your parameters—essentially your investment goals and risk appetite—the algorithm actively monitors the market, conducts analysis, and executes trades when it identifies favorable opportunities. This capability can prevent you from missing out on advantageous buy or sell prices, especially during volatile market periods.
The Risks of Using a Robo-Advisor
While AI investing apps offer numerous benefits, they are not without risks. Here are some of the key concerns to consider before diving into the world of robo-advisors in 2024.
Venturing Out of Your Depth
One significant risk is the potential for overestimating your abilities. Robo-advisors do not account for your specific skill set or knowledge level, which may lead them to suggest strategies that are too advanced for your experience. This could involve recommending the use of leverage or investing in derivatives instead of traditional stocks and shares.
Lack of Regulation
While some robo-advisors are offered by regulated platforms, many online AI investing platforms operate without regulation in the UK. Investing through an unregulated app poses risks, as you may not be eligible for financial protection. Always verify that a platform is regulated before signing up.
Uninformed Decision Making
Another risk associated with AI investing is the potential for uninformed decision-making. Robo-advisors can make it too easy for investors to neglect their research and rely solely on AI suggestions. This approach can lead to a gambling mentality rather than a strategic investment mindset. AI investment apps should serve as guides for your investment strategy, not as replacements for your own research and analysis.
Why Might Someone Use an AI Investment App?
Despite the risks, the popularity of robo-advisors has surged in recent years. According to Statista, the number of investors using AI robo-advisors could reach 34 million by 2027—nearly half the population of the UK. So, what are the advantages of using an AI investing app?
Reduce Research and Analysis Time
One of the primary reasons to consider an AI app for investing is the significant reduction in time spent on research and analysis. Robo-advisors utilize advanced algorithms to quickly scan the market, gather data, and present relevant findings in an easily digestible format. It’s akin to having a personal research assistant at your disposal.
Watch the Market Around the Clock
AI investing apps can monitor every price movement, news headline, and market trend 24/7. The algorithms continuously analyze financial markets and make suggestions based on the information they collect. This capability ensures that your investment decisions align with current market conditions.
Take the Emotion Out of Investing
Human emotions can often cloud judgment in investing. Whether it’s selling a stock prematurely due to fear or buying into an opportunity too late out of fear of missing out (FOMO), emotions can lead to poor decisions. Robo-advisors eliminate this emotional bias by basing decisions on objective data and analysis.
5 AI Apps for Investing in 2024
With a plethora of AI apps and robo-advisors available, we’ve narrowed down five top options for investors in 2024.
1. InvestEngine
Founded in 2019 by a co-founder of Gumtree, InvestEngine has quickly become a popular robo-advisor, receiving numerous positive reviews. The platform allows users to invest in ETFs across various markets, including stocks, commodities, and bonds. Users can either utilize the platform’s AI tools or build their own portfolio starting from just $1.
What We Like:
Supports fractional investing from $1.
Offers over 620 ETFs for investment.
Regulated by the Financial Conduct Authority.
User-friendly website with educational resources.
2. Plum
Plum is a highly-rated investing app that incorporates AI to help users manage and save money in alignment with their long-term goals. Recognized as the Best Personal Finance App of 2023 by Smart Money People, Plum is used by over 2 million people worldwide.
What We Like:
Mobile app for on-the-go investing and saving.
Access to over 1,800 stocks for investment.
Automated savings based on user-defined goals.
3. Wealthify
Wealthify allows users to leave their portfolios in the hands of experts. The platform can be accessed via smartphone or PC, enabling users to invest, save, and contribute to their pensions. Unlike other AI investing apps, Wealthify does not provide suggestions but instead allows a team of experts to manage your portfolio based on your goals.
What We Like:
Offers a range of managed portfolios and ISAs for long-term investing.
Available on both desktop and mobile.
Creates personalized investment plans to help users achieve their goals.
4. Nutmeg
Owned by J.P. Morgan, Nutmeg is a popular app for investing in ISAs. Similar to Wealthify, Nutmeg uses AI to manage user portfolios based on their risk levels and long-term goals.
What We Like:
Offers a variety of ISAs, including Lifetime ISAs, Stocks and Shares ISAs, Cash ISAs, and Junior ISAs.
Accessible on both PC and mobile.
Provides ethical investing options for environmentally conscious investors.
5. IG Smart Portfolios
IG Smart Portfolios is a service provided by IG that manages your portfolio according to your financial needs. With a six-year track record of delivering returns, IG is one of the most popular AI investing apps available.
What We Like:
Access to over 13,000 markets.
Consistently outperformed benchmarks for six years.
User-friendly interface with ample resources.
Our Top Tips for Staying Safe When Using an AI Investing App
As AI-powered investing apps become more prevalent, it’s crucial to prioritize safety. Here are our top tips for ensuring a secure experience when using these platforms.
1. Shop Around
Conduct thorough research before selecting an AI investing app. Look for reputable companies with a proven track record and positive user reviews. Consider factors such as security measures, regulatory compliance, and transparency in investment strategies. Don’t hesitate to ask questions or seek recommendations from trusted sources.
2. Do Your Own Research
While AI apps can significantly reduce the amount of research you need to conduct, it’s essential not to neglect it entirely. Stay informed about the stock market and regularly assess whether your portfolio aligns with your goals.
3. Understand Your Risk Appetite
Most AI investing apps will ask you to determine your desired level of risk. High-risk options may offer higher rewards but come with a greater chance of losses. Conversely, low-risk portfolios may not yield impressive returns but typically carry a lower risk of losing your investment. Take the time to evaluate whether you can afford to lose the money you invest before selecting a risk level.
With the rise of AI investing apps, you can access sophisticated algorithms and data-driven insights at your fingertips. However, it’s vital to approach these tools with caution and conduct thorough research before making any investment decisions.