As the global adoption of Fintech continues, more and more advanced technologies will be utilised for trading and investing. One of the most exciting developments in computer technology in recent years is Machine Learning. This field enables computers to extract information, ‘learn’ on their own and is a vital aspect of artificial intelligence.
To learn about how machine learning works in investing, check out this blog post.
Here at eToro, we are excited to introduce additional machine learning Smart Portfolios to our existing offering. Our dedicated team of data scientists have been able to harness the power of machine learning and artificial intelligence (also referred to as roboinvesting) to create revolutionary investment products.
The first such creation was the MomentumDD Smart Portfolio, which uses machine learning to locate traders who are most likely to generate a positive return and bundles them into a managed, low-risk portfolio. Over the past 12 months, while maintaining a low risk, it has generated impressive gains of more than 22%. Using the same layer of technology eToro is now launching two new highly sophisticated machine-learning based Smart Portfolios.
OutSmartNSDQ: Beating the Benchmark
eToro’s first SmartBeta Smart Portfolios, OutSmartNSDQ is designed to outperform the NSDQ100 index.
“[OutSmartNSDQ Smart Portfolios] selects a few dozen stocks out of the NSDQ100 based on a select group of our clients trading activity. We’ve been able to show that some of our traders are actually able to consistently beat the NSDQ100 index over the past three years,” says eToro CEO Yoni Assia.
An algorithm is then used to find these traders’ collective sentiments, and pick the Nasdaq stocks that will comprise the Smart Portfolio. To manage risk, the Smart Portfolio is built in such a way that ensures each of the stocks has the same risk contribution to the portfolio, and is rebalanced on a quarterly basis, to make sure it stays true to the investors’ sentiment.
Your capital is at risk. Past performance is not an indication of future results. This is not investment advice. CFD trading.
AITrader50: Picking the Right Traders
This Smart Portfolio is the sibling of MomentumDD, our first Machine Learning Smart Portfolio.
While MomentumDD is targeted for investors with a low-risk appetite, AITrader50, is targeted for investors with low-mid risk appetite.
This Smart Portfolio uses machine learning to select from the 50 top traders on eToro who are most likely to generate a positive return over the next month. Each of the traders has equal allocations within the portfolio (2%), however, the Copy Stop Loss (the amount of losses needed to automatically stop copying that trader’s investment) is set to 1.5X the monthly risk volatility of each trader’s portfolio (standard deviation) in order to provide flexibility. Over the past 12 months, this Smart Portfolio has performed admirably, showing gains of 25% while maintaining a low risk.
Your capital is at risk. Past performance is not an indication of future results. This is not investment advice. CFD trading.
Investing in Machine Learning Smart Portfolios
Each of the new Smart Portfolios launched presents a different investment opportunity. While OutSmartNSDQ provides explicit exposure to stocks on the Nasdaq, AITrader50 is not limited to any asset class and purely represents the sentiment of our top traders. It is important to remember that Smart Portfolios are better suited for long-term investors.
Depending on your strategy, you can choose which of the two Smart Portfolios, OutsmartNSDQ or AITrader50, is preferable to you. Alternatively, you could diversify your investment portfolio by including both of these Smart Portfolios.
Here at eToro, we will continue to pioneer and champion new technologies. Our artificial-intelligence-based, machine learning Smart Portfolios present another fine addition to our ever-expanding trading and investing platform.
Your capital is at risk. Past performance is not an indication of future results. Data is accurate as of February 10th, 2018. This is not investment advice. CFD trading.