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How AI and Investing Are Merging

By U.S. News & World Report

You wake up to your morning Joe, which your coffee machine brews just the way you like it because it has learned your tastes, even when they change. Alexa greets you and before you can even ask about the weather, she says her parent company Amazon.com (Nasdaq: AMZN) is going to release its quarterly earnings report. “Based on your investment style and market trends, I would suggest allocating $10,000 to a stock purchase,” Alexa says. “Would you like me to make that transaction?”

Far-fetched? It may sound that way but experts maintain it isn’t. That’s because artificial intelligence — also known by its initials, AI — promises to be the financial sector’s runaway hot topic for 2018. Already, early AI has a secure foothold among investors that’s beyond debate.

“In five years, AI will revolutionize all aspects of our financial lives,” says Larry Miles, principal at AdvicePeriod, a web-based wealth management platform. “For example, AI will advise us not only how to invest our money, but when and how to save our money versus paying down debt such as student loans.”

How does AI work in investment? Two of its most crucial elements rest on data. The first is big data, which is composed of reams and reams of numerical information that would take a human years to collect and organize.

[See: Artificial Intelligence Stocks: 10 Companies Betting on AI.]

The second element, data analytics, takes the organized numbers (sometimes referred to a “clean” data) and generates meaningful insights that can guide current and future actions. AI also incorporates an attribute known as machine learning, where the computer can improve its performance over time as it corrects and refines its previous actions — often based on external factors such as changes in market conditions.

This also incorporates the likes of Alexa and Apple’s ( AAPL) Siri, which are known as “chatbots” — literally, computer programs you can chat with. As AI progresses, interactive conversations with chatbots could help guide investment decisions, even as computers “learn” how we think, act and best succeed.

Here’s what that looks like so far: “Merrill Lynch is experimenting with an AI stock-picking tool to help it identify value in small-cap stocks that conventional analysts might have missed,” says Bill Studebaker, president & CIO of ROBO Global, creator of a benchmark index to track the global robotics and automation industry.

And here’s why the machine learning aspect matters: “Quant investment ideas are starting to have shorter expiration dates as trading signals get arbitraged away,” Studebaker says. In light of this, “BlackRock ( BLK) is steering its quant research toward machine learning and exploiting social media and web search information.”

But not everyone in the investment and trading sector sees AI as a portfolio panacea.

Following the financial crisis of 2008, “mathematicians and computer science people told the finance people that mathematics and computers could do what the financial professionals were looking for, and the finance industry bought it,” says Darren M. Fischer, head recruiter with Maverick Trading and lead author of the book “Maverick Trading: Professional Techniques to Create Generational Wealth.”

Fischer sees today’s AI as a natural progression from algorithms and trading bots. Still he believes the practice of AI does not make perfect.

[See: Are Quant ETFs Worth Buying?]

“Algorithms work, and work well — until they don’t,” he says. “When they blow up, they blow up spectacularly.”

Then there arises the question of when intelligent machines that learn will decide they’re smarter than their human creators. On a more benign level, it’s been posited that computers will get cocky and tweak or even ignore your investment portfolio plans. Then it will do what it thinks or “knows” is best — though for out-of-control market timing junkies, this could be a very good thing.

As for the billionaires in the crowd, two very smart ones imagine AI scenarios that go a step further — much further. Mark Cuban predicts that, on the one hand, the AI sector will produce the world’s first trillionaire. On the other, he’s said that AI’s mastery of humans, or the prospect of such, “scares the [daylights] out of me.” And Tesla ( TSLA) co-founder Elon Musk, a font of futuristic plans, believes AI represents “our biggest existential threat” and that we are “summoning a demon.”

But a third billionaire, Mark Zuckerberg of Facebook ( F), has a much sunnier disposition. He’s called Musk’s forecasts “pretty irresponsible” and sees a future of good in AI that will make people’s lives easier. Musk has responded, in essence, that Zuck doesn’t know what he’s talking about. Perhaps an AI-activated referee needs to mediate their public debate.

Meanwhile, hold off on any premature oaths of allegiance to our machine masters. In the end — and it’s not the end of the world by any stretch — AI can only do what its human programmers and users design it to do. We can decide in advance to mold investment tech into our very best helpers: faithful digital marvels that shun coffee breaks, don’t whine by the water cooler or push for promotions, while flesh-and-blood investment professionals call the shots.

“Active management will have a resurgence, because of AI,” says Steven Miyao, head of DST Research, Analytics and Consulting.

“We will see a tremendous amount of innovation in acquiring and processing large data sets that will help portfolio managers get a competitive advantage over traditional portfolio managers,” Miyao says. “Every active portfolio, defined as dynamic and not static investment model, will utilize AI to at least help them make more informed decisions.”

[See: 7 Stocks That Will Ruin Your Portfolio.]

And if Alexa dares to disagree, ask her to stick with checking the weather.

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How AI and Investing Are Merging originally appeared on usnews.com

Don’t Settle for Student Loans to Pay for Online Education

By WTOP Staff
Online college programs are becoming a more popular choice for prospective students, with one study finding that more than 6 million students enrolled in at least one online course in fall 2015. The popularity of these courses can be attributed in part to their flexibility with working adults' schedules, students' ability to progress more quickly through online programs and, oftentimes, cheaper tuition. [See 10 low-cost online bachelor's programs for out-of-state students.]Online degrees can be beneficial to many college students, but some studies have shown online learners complete their programs at lower rates than students at traditional brick-and-mortar campuses. Individuals with student loans but no degree comprise two-thirds of defaulted borrowers. Though these numbers are not encouraging, just like for traditional programs, there are ways to reduce how much you'll need to borrow for an online program to ensure you won't become one of these statistics. Don't just settle on borrowing student loans to cover the whole cost of your program and living expenses. Instead, start thinking about how to cut costs and cover your balance in different ways, such as the following. -- Grants and scholarships: Even though you are taking an online course, you can still apply and receive grants and scholarships. But your first step should be to complete the Free Application for Federal Student Aid, commonly referred to as the FAFSA, which will allow you to receive a Pell Grant if your expected family contribution is low enough. The EFC criteria and award amounts are adjusted annually, but the 2017-2018 academic year awards range from $606 to $5,920, which could significantly lower the amount you borrow annually. Your next step is to apply for scholarships. You can start by checking online scholarship search engines, such as the Salt Scholarship Search, College Board's BigFuture and Peterson's. But don't forget to take advantage of local organizations and your school's financial aid office. Both may offer scholarships that you can't find with a national scholarship search. [Review these 10 sites to kick off your scholarship search.]For instance, organizations like the Elks Club, Knights of Columbus or the Rotary Club typically offer scholarships annually to local students. Just because you're going to school online doesn't mean you're ineligible. Visit your local library for scholarship listings, and ask around town. You might be surprised how many local organizations offer scholarships. While these scholarships typically aren't large, every little bit counts. Each dollar you receive in a scholarship is a dollar you don't have to borrow and pay interest on. -- Work-study: Another option for online students may be work-study awards. Not all students enrolled in online programs are eligible, but students at some schools -- including, for example, SUNY Empire State College and Liberty University -- are. Work-study awards are not given upfront like scholarships and grants. In most cases, they are an offer to earn up to the awarded amount if you secure an eligible work-study job. While there is a misconception that all work-study jobs must be on campus, students can work for off-campus, nonprofit or public employers as long as the work is in the public's interest. You may be able to work for a for-profit employer if the job is relevant to your course of study. No matter who the outside employer is, it will need to have an established agreement with your college for you to receive work-study funds. Remember, to be eligible for federal financial aid, you must be enrolled and pursuing a degree or certificate. If you're not working toward a credential, Pell Grants and work-study won't be option, but you may still be able to take advantage of private scholarships -- just be sure to read the eligibility criteria carefully. [Explore what to know about financial aid in online programs.]-- Pay as you go: One of the great benefits to enrolling online is the flexible schedule, which can allow you to complete your college coursework around your responsibilities. But prospective students often overlook using their part- or full-time job earnings as an option for paying for college. Almost 80 percent of college students in 2015 worked at least part time while attending classes, according to the National Center for Education Statistics. By budgeting and thinking strategically about your college costs, you can likely reduce your dependence on student loans by paying a portion out of pocket. Many -- but not all -- online programs are less expensive than traditional programs and often have shorter payment periods. Six, eight or 10 weeks are common course durations. Because of the frequency of payments in an online setting, you may be well-placed to pay as you go and possibly avoid borrowing altogether. Attending college online and avoiding student loans may be challenging, but if you are willing to put in the effort, you can limit the amount you need to borrow. More from U.S. News Q&A: Understanding Student Loan Discharge Eligibility Student Loan Refinancing Isn't Right for All Borrowers
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