May 28, 2024
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Artificial Intelligence (AI) is changing the way Canadians invest.
By utilizing AI, firms are now offering innovative tools and online platforms that seek to maximize portfolio performance — in ways that equal and often exceed human investment portfolio managers often with little to no effort from the investor.
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The success of AI in investing is evident, with a rise in AI investment tools such as robo advisors and automatic trading platforms — many of which are now owned or used by Canada’s banks and largest fintech companies.
Does that mean that every investor needs to engage and use AI investment tools? To decide if AI investment apps are right for you, consider the advantages and potential drawbacks of making AI part of your investment strategy.
AI investing versus investing in AI
To be clear: There is a distinct difference between AI investing and investing in AI. Each strategy and tool represents a fundamentally different approach to using AI as a way to maximize investment strategies.
Investing in AI
Investing in AI means an investors adds AI stocks or exchange-traded-funds (ETFs) to their investment porfolio.
This strategy doesn't mean the investor has used AI to invest. Instead, this strategy aims to capitalize on AI technologies by investing directly in this companies (or sectors). Buying stocks or ETFs in leading AI companies could allow you to benefit from artificial intelligence's growth as a sector.
For example, you could buy stocks in OpenText (TSE:OTEX), a tech company specializing in information management software that uses AI to improve businesses.
Additionally, ETFs that track AI and related technology offer a way to invest in this field, providing exposure to a broader range of companies involved in AI development. One example of an ETF would be Invesco Morningstar Global Next Gen AI Index ETF (INAI), which exposes investors to various companies developing AI technologies.
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To make things just a little more complicated, your robo-investing bot may buy AI stocks for you.
Investing using AI
On the other hand, AI investing is the application of AI technologies by investment companies, banks and fintech businesses. This approach enhances investment strategies, offering clients a hands-off investing experience. By relying on artificial intelligence and complex algorithms, these entities can optimize portfolio performance, mitigate risks, rebalance portfolios and enhance portfolio management.
Growing interest in AI investing
Finally, there is another way the terms "investing in AI" or "AI investing Canada" is used. Investing in AI can also refer to the Canadian government's recent significant efforts1 to encourage and support the AI sector. To solidify the nation's position as a global leader in artificial intelligence, in April 2024, the government announced a major $2.4 billion package in the upcoming budget to increase job growth in the country's AI sector and encourage businesses to develop and adopt AI responsibly.
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AI investing: What apps or tools are available to Canadians?
Here are some examples of AI investing opportunities in Canada:
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Wealthsimple: Wealthsimple is a popular robo-advisor that offers new and passive investors a variety of portfolios to suit different investor strategies. It builds and manages your portfolio automatically using AI-driven robo-advisor technology with no participation required on your part. Open a Wealthsimple Robo-Invest account today and get $25 in commission-free trades, as well as free ETF and stock purchases. Disclaimer: Terms and Conditions apply. Visit Wealthsimple via our Apply Now button for up-to-date terms and conditions.
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Moka: Moka is an app that automatically rounds up your purchases to the nearest dollar and invests the money in low-cost ETFs. You can also make weekly contributions to boost your savings. The investing is done automatically based on your investing profile. Moka is unique because it “finds” money and then invests it automatically on your behalf, making Moka the best example of a hands-off AI investing app. Open a Moka account and get access to five professionally managed portfolios, and put your nest egg on investing autopilot.
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Questrade: Questrade offers Questwealth Portfolios, which is a low-fee robo-advisor service that uses AI to manage your investment portfolio. Open a Questrade account and pay no annual fees and low trading fees.
The pros and cons of using AI investing
Advantages of using AI investing
- AI investing is accessible and easy even for those who know nothing about investing
- Generally comes with low fees
- AI investing bots are able to perform as well as or better than humans, at a much lower cost2
Disadvantages of using AI investing
- Some people enjoy have face-to-face meetings with a human advisor
- Robo-advisors generally invest in ETFs, which may not appeal to those who are interested in individual stocks
Read more: The ultra-rich are bailing on volatile stocks right now — these 4 shockproof assets are their new safe havens
Bottom line
AI investing is not going away anytime soon. While some people may miss the human touch, leveraging AI to make investing more accessible and affordable is a significant step forward in democratizing personal finance.
Sources:
1 Securing Canada’s AI advantage (Apr 7, 2024)
2 ScienceDirect: Do AI-powered mutual funds perform better? by Rui Chen and Jinjuan Ren (June, 2022)
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Sandra MacGregor has been writing about finance and travel for nearly a decade. Her work has appeared in a variety of publications like the New York Times, the UK Telegraph, the Washington Post, Forbes.com and the Toronto Star.
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