Today, we offer one of those exceptions that proves the rule. Recent research, quoted extensively in the excerpted article below, demonstrates that humans are still just about ahead of artificial intelligence in the field of investment. AI has already bested us at Go, prompting the retirement of the reigning world champion. And the dominance of computers is chess is long-established, with world champion Gary Kasparov falling to Deep Blue back in 1996. Today’s computer chess programs are infinitely stronger.
Humans still have the edge over artificial intelligence when it comes to making money in the financial markets, according to a new paper which raises questions about previous research into the topic.
AI has become a mainstay in the financial services sector over the last decade, playing an important part in everything from cybersecurity to chatbots.
Yet, despite the huge amount of data generated by financial markets, machine learning and AI algorithms are still not a big part of the investment decision-making process.
In their study, Barbara Jacquelyn Sahakian, Fabio Cuzzolin and Wojtek Buczynski analysed 27 peer-reviewed studies by academic researchers published between 2000 and 2018 that described different kinds of stock market forecasting experiments using machine-learning algorithms.
The academics found problems with cherry picking in the studies: most of the experiments ran multiple versions of their investment model in parallel, with the authors almost always presenting the highest-performing model as the primary product of their experiment.
Historical Performance And IFISA Process Guide
That figure is the result of over £24 million of loans facilitated on the site, as we bring individuals looking for a good return on capital together with carefully vetted small companies seeking funds for growth. Bear in mind that lenders’ capital is at risk. Read warnings on site before committing capital.
All loans on site are eligible to be held in a Money&Co. Innovative Finance Individual Savings Account (IFISA), up to the annual ISA limit of £20,000. Such loans offer lenders tax-free income. Our offering is an Innovative Finance ISA (IFISA) that can hold the peer-to-peer (P2P) business loans that Money&Co. facilitates. For the purposes of this article, the terms ISA and IFISA are interchangeable.
So here’s our guide to the process:
The ISA allowance for 2020/21 is unchanged from last tax year at £20,000, allowing a married couple to put £40,000 into a tax-free environment. Over three years, an investment of this scale in two Money&Co. Innovative Finance ISAs would generate £8,400 of income completely free of tax. We’re assuming a 7 per cent return, net of charges and free of tax here.
Once you have made your initial commitment, you might then consider diversifying – buying a spread of loans. To do this, you can go into the “loans for sale” market. All loans bought in this market also qualify for IFISA tax benefits.
Risk: Security, Access, Yield
Do consider not just the return, but the security and the ease of access to your investment. We write regularly about these three key factors. Here’s one of several earlier articles on security, access and yield.