AI: Risks vs Benefits

Now that you know how artificial intelligence has made its way into the markets, let's go into detail about the risks and benefits of using AI in finance. It's probable that you've seen all sorts of AI pop up lately, and may even be concerned: at what point has it gone too far? Or, you might be excited for all the doors it has the potential to open up. Just like anything else, there are pros and cons. At the end of the day, it's what we do with this technology that will show the true dangers, or lack thereof, of artificial intelligence.

Risks

While many people have been swept up in the AI boom, it's crucial to keep in mind that this new tech should be approached with caution. Here are a few of the risks that come with using AI:

- Losing human connection. In a world where everything is becoming digital, it can be easy to lose touch with the people around us. With AI becoming more and more integrated into our lives, some worry that it may prevent real connections from being made and make certain things, like processing your finances with a real person, more difficult or less personal. The concern is that artificial intelligence will overcome the need to communicate with other human beings, making it hard to experience life with a connection to the world outside of a computer.

- Lacking transparency. Without having a person to develop, check, and verify every process, issues may come up regarding algorithm bias, model errors, and the inability to fix an issue without being able to find the root of the problem.

- Privacy issues. People feel more secure when the companies they trust with their assets can promise safe, secure use. Security concerns can arise as more tech can mean more potential for cyber-attacks, and with such relatively new uses for artificial intelligence are becoming more of the norm, it makes sense that some may be wary of giving their personal data to an AI.

- Dependency. Just like the markets are impossible to predict, the future is as well. Introducing new things to the already tricky world of finance and investing could lead to difficulty in terms of how this technology will develop and age, if it will always be used for the intended reasons, and if we might lose the ability to perform tasks without the assistance of artificial intelligence.

Although these are just a few examples, it only hits the tip of the iceberg concerning current fears over using artificial intelligence. Of course, this isn't to say that using AI is a negative thing. All good things come with risks. There are plenty of pluses to artificial intelligence as well.

Benefits

Even though AI comes with worries about the future, it isn't all bad. There are, as you may have already experienced yourself, several benefits to using the newest renditions of this technology, like these ones:

- Simplified investing. Portfolio management via robo advisor can help people get started in investing in a hands-off way. This promotes accessibility in the finance industry, as it provides a way for more people to start their investment journey who may otherwise not have the time or capabilities to focus on developing and maintaining a good portfolio.

- Data analysis. Analyzing data precisely can be complicated, strenuous, and time consuming. AI has the capacity to do analyze data in seconds that could take a human team days to complete. This feature frees up more time for finance professionals to be more productive in other areas.

- Cost reduction. Many processes in finance can come with a cost due to tedious tasks including filing and processing sensitive materials. Automating this can reduce the time and money needed to do such things, all while minimizing the margin of error.

- Regulation. AI can help keep the industry compliant, using precise algorithms to catch things that can be more difficult or take longer for a human. Detecting fraud, avoiding default, protecting against potential crime, maintaining customer privacy, and many other things can be made more accurate, efficient, and effective with AI capabilities.

While there are valid concerns over using AI in finance, there are also many benefits that a lot of people are excited about. Of course, it's always best to evaluate all your choices before making any investing decisions, and whether or not you'd like to personally use artificial intelligence to aid your investment journey is up to you.

Interested in using an automated portfolio? Check out Webull Smart Advisor!

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