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AI, machine learning help investors gain ‘edge’ while investing

Eighty percent of large-cap mutual fund managers in India have been unable to beat their index over the last five years. This is because humans are emotional and suffer from biases, panic, and euphoria, no matter how disciplined.

May 22, 2021 / 07:43 AM IST
The only constant thing is that the edge is dynamic. There is no “code” you can crack to learn the markets.

The only constant thing is that the edge is dynamic. There is no “code” you can crack to learn the markets.

When we are investing in the market, we are all looking for an 'edge'. As the markets are a zero-sum game, an edge is an unfair advantage that we believe will land us on the right side of a decision.

This edge (whether real or perceived) can be your analysis of stocks, trusting the right expert, some intuition, technical analysis or using technology. The edge helps you be right a little more than 50 percent of the time, like a loaded coin in a coin toss that shows heads 51 out of 100 times.

The only constant thing is that the edge is dynamic. There is no “code” you can crack to learn the markets.

This is not true for other applications of AI – for example, training an AI system to learn how to drive a car, or perform surgery, all of these have some immutable laws, and an actual code to be cracked, i.e. the problem is solvable.