Artificial Intelligence and its Role in Portfolio Management

By Stephen V. Kenney, CFA, CFP
Gray Private Wealth, LLC

Artificial intelligence (AI) has moved rapidly from a futuristic concept in science fiction novels to being a reality that is expected to dramatically increase productivity across much of our economy. Though still early in its development, AI is already changing how we access information, communicate, and transact. Many prognosticators believe AI could potentially have an equal or possibly larger impact on our global society as the internet has had over the past 30 years.

AI systems in their early versions work to access and analyze vast amounts of data to identify patterns and make predictions about how relationships or events may occur in the future. Some of the applications for this technology today include weather forecasting, insurance underwriting, and social media advertising. Another application of AI technology is the drafting of written material based on AI’s ability to review trillions of word patterns that exist on the internet. Future AI development will include the ability to recognize and predict patterns in real-time data as a means of assisting in human decision-making.

AI’s ability to analyze vast amounts of data means that it can be a valuable tool in the investment industry.  Decades worth of data exists for publicly traded companies’ financial results and daily stock price movements. AI will allow investment managers to extend the reach of their analytical teams to evaluate how stock price movements have been influenced by a vast number of variables in the past.  This process is likely to be one tool used by investment teams as they seek to assemble portfolios of stocks expected to perform well together in the future based on historical relationships. 

We also expect AI to improve risk management of investment portfolios by more deeply analyzing past patterns of how asset classes perform relative to each other.  This will allow for enhanced decision making on how to diversify portfolios with the aim of reducing portfolio volatility.

AI is rapidly evolving into a tool that will drive dramatic changes in how we live. Not only will AI create new opportunities for investment, we also expect that it will play an important role in the future of portfolio management.

Stephen Kenney, CFA, CFP is Director of Client Development at Gray Private Wealth, LLC, a wealth management advisory firm located in Canton, MA. He can be reached at (781) 232-2020 or

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