Capitalist Investor

How AI Could Make—or Break—Your Investment Strategy, Ep. 318

• Strategic Wealth Partners

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Ep. 318 – Is AI a Friend or Foe for Investors?  

How AI is transforming portfolios, financial advice, and the role of real advisors.  

Is Artificial Intelligence the future of investing—or a threat to your portfolio? 

In this episode, Derek and Tony explore how AI is being used in wealth management and investing. Can it help you build smarter strategies—or is it just another Wall Street distraction? We unpack the hype, the risks, and what savvy investors should actually pay attention to. 

Whether you’re curious, cautious, or already experimenting with AI tools, this one’s for you.  

🕒 Time-Stamped Highlights: 

  • [01:15] – Will AI take over financial advisors’ jobs?
  • [03:30] – How AI is used in investing today
  • [06:45] – Real risks of AI-driven decisions
  • [09:50] – Why trust, emotion, and planning still matter

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All right, Tony, so I hear AI might be able to take over our jobs here. So do you think we'll be able to get out on the golf course more? Absolutely. I just hit the. I hit the play button and I get to go play for four hours really quick, get a quick round in, come back, and my work's done. That sounds wonderful. Can we do that? Do you think it can help my golf swing? No. Yeah, probably not. Hey, guys, welcome to this week's episode. Tony, how we doing today? Doing all right, man. Keeping it real out here in the streets. Yeah, Very exciting topic this week. It's, it's very, you know, it's, it's a little bit concerning because we did ask AI what topic to talk about. They're like me and they said AI and investing. But I said, you know what, that does sound, that does sound like a good topic and timely, obviously. So, so, yeah, we'll get into. And people, whether it's at client events or meeting one on one, this is a very common topic to bring up. So, yeah, we thought it was an excellent topic for the show. Yeah. So talking about how AI and how it is going to start affecting both our investment strategies and also our banking. Right. So AI's big boom, what, the last maybe 2ish years, I would say it's become Main street popular and, you know, work, you know, AI is going to be looking at trading algorithms. That's kind of what AI is, a big algorithm. It's more complex than probably the C programming that I got in engineering school. It's going to help identify market trends and eventually maybe personalize your financial advice. And it's funny, I was talking to a room of high, you know, people that own, you know, businesses like ours just a lot bigger. Right. And they're like, hey, AI like kind of concluded, like, maybe, maybe in the next decade. It's not going to happen next year. It's not going to happen in three years, but maybe in the next decade, like, maybe AI does replace financial advisors, but there's just so much that the human brain can, I guess, digest. But. But because sometimes, sometimes making a decision isn't always about making the most money, as weird as that sounds. It could be. It could just be an emotional decision. Right. Like, I just don't want to invest in that. I just do not like XYZ Person or XYZ Company, you know, so that's the biggest thing here, is that AI in the investment management side. So. Yeah. Can it make a diversified investment portfolio? Sure. I mean, that's been written in, in stones in a thousand years ago. You know, make sure you got your stocks, make sure you got your bonds. Like is, you know, classic modern portfolio theory. Like that's easy, right? So I'm going to talk about, about that, but can it identify undervalued assets and predict market volatility? Like, come on man, like, let's just think about like when, when the market went haywire about two, three weeks ago because of the tariffs. The market, everything that was being said priced in about an 8% decline in the market. Trump comes out and throws, throws up his tariff board and the market dumped off another 8 to 10%. You're telling me a robot was going to predict what was going to come out of that dude's mouth? No, no way, dude. No way. So this, this, this AI driven system, you know, it's, it's going to help mitigate losses by identifying response to emerging threats. So here, here's where, here's where I get lost is, you know, time in the market is better than timing in a market. What's this algorithm? What is this thing gonna do? Is it gonna be buy and hold? Is it gonna be strategically getting rid of a stock ahead of maybe an earnings call? Know what your limitations are? Like, hey, I'm up 30%. Human behavioral finance would say, hey, I just got into stock, it's up 30% in the first two weeks. I'm in it. Like, can't wait to take this thing to the moon. And it'd be up 300%. I know my guys, you know, like our investment team would do something where it's like, well, we really weren't expecting 30% in two weeks. We are going to now either chop the position in half, take the profits, or just get out of it. In general, it's like outperform what we did and we did it in two weeks. Like, we're done here. Would your computer program know to do that? You know, like, how do you like dial this thing in to make a decision like that? That's my question. And does it under how, when is it going to know what you're comfortable paying in taxes? What do you have a non qualified account? It's like, hey, we don't like this stock. You've been in it for five years, it's up 5,000%. Yeah, we're just going to sell that. You can't yell at the robot. What are you going to do? You can call, yell at me, type. In a response to the robot. Yeah, robot, bad robot. Right. Me and you. We get lashed, right? We got phone calls. That's why I make phone calls before I blow up somebody's tax account, right? Y. What about, what about this? All right, maybe you're going to have a computer versus a robot thing where it's like, all right, all the robots are going to go in this direction because that is the way things are flowing. News flows, fundamentals, macros, technicals. And then you just have a bunch of humans saying, I'm going to short what the robots are going to do or, or vice versa, or just go super long, right? Yeah. Like there could be this beat the robot mentality. Right? And then, you know, Derek, when you and I taught like these, like the educational classes, you know, we talked about, like, hey, if you want to do investing on your own, you can go get a value line report. So like, that's just like Morningstar, but it's for stocks, right? And you can take, they'll, they'll Basically take the 500 page SEC print, annual print of a company and put it on a sheet of paper for you where it's like. And then we'd always say, I'm like, that's great if you want to get general knowledge of a stock, right? And, but you're not Warren Buffett. You're not going to pop in your private jet. You're not going to go walk into the building, see the infrastructure data. This place need to be updated. Is it out, does it need tech updates, is it falling, is it crumbling? Right. Or what if you just get bad data? Just like Enron. Yeah. You know, like again, there needs to be. I always feel like there's always going to be a spot for humans to out think and out emotionalize a robot. Yep, for sure. So, yeah, you know, that's, that's, that's all excellent, you know, set up and points there. You know, I've obviously been, been thinking about this a lot. You know, personal job security does, does come into play here as well. I think we're probably okay for a while though, because of a lot, a lot of things that, that you just said. But what I will say, you know, I think what, you know, AI can bring is, is speed and I think that's where the ethical and the regulation issues come in. Right. Because, you know, it's a lot of this is still reaction based. Right. Like a robot isn't going, a robot can come up with, with some, you know, possible outcomes. But if, you know, Tesla is on its earning call and they say, hey, you know, we blew out our Number, you know, robots not going to know that they blew out their number beforehand. Right, right. And then once that is reported, everyone's going to rush, rush to buy. Right. So in, in, you know, this was a, this was a topic of conversation, you know, about five, six years back when, when they were talking about like front running trades. Yeah, you remember that with like the data centers and they would get a split second ahead of these trades and make a couple extra pennies. And when you, you know, you compound that over large numbers, it becomes a significant amount. So, yeah, I don't know exactly how different the AI algorithms are going to be from just the old school algorithms that people have been using for years and years and years. We had a black box strategy long time ago that kind of pulled chips off the table if things were not looking good and put some more chips back on the table when volatility was lower. You know, those things. One day of volatility does not spark three months. I mean, exactly. It can change very quickly. Yeah, you're right. We had the black box type of algorithm and it got whipsawed by the time it figured out, like, oh man, the trend's bad. Yeah, the trend reversed. Exactly. Very quickly. And that's, that's even worse today because everyone's so on their phone and, and really dialed into alerts and all that stuff, man. And so, and then again, I like thinking about this weird stuff. I'm like, I don't. All right, we have this robot algorithm. Who's in charge of it? What if they decide, what if somebody else or the creator decides to hack it? Right. Like they could swing a market and wipe everybody out. And one person's got all the money, literally all the money in the world and wiped everyone out. Because they designed a market flow to swing so hard in one direction and they were on that side of the direction. Yep. Seriously though, like right now it's like, I don't know what the hell you're gonna do. Are you gonna buy Tesla? I don't know, maybe. And like you run the other way, right? Like, so is he scared or is he going to buy it? I just can't tell. That's a human thing, right? I can look you in the face, I can't tell. These robots can just be like, hey man, if you do, you know, sign in within seconds, figure out something that's, that's a scary part for me to be honest. Definitely, the, the speed is definitely going to be, become an issue. And then when, you know, when, when the algorithms are trading you know, on this stuff, you know, on their own that, that also becomes difficult to, to regulate and can also be, you know, like Tony said that word whipsaw, you know, that, that is, that is a real thing. No matter if you're doing it on your own. If, you know, if a robot's doing it for you, you have to just making a bunch of split second decisions, you know, throughout the day every single day isn't really the type of strategy or trading a lot of our clients are looking for, you know, kind of a more slow and steady wins the race type of thing. Yeah. So I mean if it's, if it like it made the trade and you didn't like it and you're like, hey, AI accountability, why did you do that? Right. I mean maybe it will spit out like here's five reasons why we did that. And you're like, these reasons are stupid. Like what are you thinking? Exactly. It could be right. But the future and I think he kind of nailed on the head right now. So if we just take the short view, right. The short term view, the future of AI right now is, you know, in banks speeding things up, application processes, customer service loan approvals. I mean it's almost instantaneous now, right. Or within a day or something. Just have somebody spot check it. Fraud detection is a, is a big one that I think could be helped out too on that list. Yeah. You know, it's like that's, that's a perfect, that's a perfect application for, for, for AI because they can quickly process the data and identify things that don't look right and send them to a human essentially. Right. You know, that, that, that's good stuff there. Yep. And I, and I thought about this too. Like the macro and fundamental technical is easy. Like technical analysis for a robot is. That's what exactly it is. It's technical. It's like curves, charts, swings, you know, moving average, you know, below or above a moving average, you know, whatever. Right. But the macro, like what is going on on TV and what are these companies saying about what's going on on tv? Right. I think like for example, what did Amazon come out today and said, hey, prices are going up because of Trump's tariffs. Then we're going to show you like here's the original price and here's it with the slapped on tariff, like saying, hey, it's the same me. This ain't us making extra money, this is what's happening around us. And their stock plummeted. Right. So that's a, this did the Robot know that, you know, they were going to come out and do that? No, but how fast would they react to that? Would they know? Would you really look at that as positive or negative news? Because the mark today, as I see it, the market's not really reacting to that news very much. Right. To be honest, it's actually, I think more at this time about a recording. The market's up. Right. Kind of got, kind of went backwards a little bit, but now it's fine. But I think we're 10 years away from it actually picking anything because there's a lot to learn. Like you said, like learning that human, that human element that goes in to picking a stock. Could it help us make the decision, us make the decision faster? Sure. Right. But I'm asking, I'm asking AI probably specific pointed questions, not like, hey, should I buy this and be like, well, you know, like last 10 years it's been great. And did, you know they're building, you know, Disney's building five new theme parks or whatever that might be. Does that know that it broke ground? Right. Or it's in the making. No. Right. So. So yeah, you know, I think, yeah, 10 years does sound about right. You know, we've been bombarded in the last 12 to 18 months with, especially in, in, in this industry with, you know, just AI is the future. Right. And then we saw Nvidia just blow up and then, and then we saw earnings behind it, which is, which is, you know, something you don't usually see. Yeah. With, with, with new products like that. You know, I'll, I'll, I'll hit you with a, you know, another sports analogy since, since that's all I have. But, you know, the, since we just got through the draft, you know, the term analytics is out there, you know, and I think it's kind of, that term has kind of gone away, I think is just kind of factored into to what, to what teams do now. But I would say AI and investing, you know, is just kind of a tool in the toolbox right now. You know, whether you're doing it on your own or, you know, you're like us and you're managing assets. It's, it's something that can, that can help out, is something that can help you quickly get data. But as far as being able to, you know, replace humans and, you know, being something that you can completely and totally rely on. Yeah, I, I don't think, I don't think we're, we're there yet. Yeah. You know, and I, you know, and I were talking before the podcast started and I know you've fielded this question in Sovive, where like, I know that we had a zoom company wide saying, hey, we're we a strategic wealth partners in interested in creating an AI driven ETF where the AI would make the picks, right? So, Chris. Was that a timer? No, because I turned it on this morning. I should reset it. All right, I'll say, like where AI makes the picks. It might have been a fast blackout there. I don't know where AI made the picks. And let's just say there was 10 months of work that would go into the vetting of this. This is why, you know, some people might have been on that zoom and why we haven't, you know, done anything since then is, you know, if we, if there were hypothetically 10 weeks to vet this thing or 10 months or whatever it might be, we spent a month or two already digging into it. And we liked enough of what we said. But it's like, before we invest another eight months, let's just see if there's an appetite for it, right? It was more of like, hey, this is what we want to do. This is the idea behind it. And the whole idea was to remove the human element, not make like, hey, let the computer make 95% of the choices. And if I don't like one, I'm not going to do it. Not then the whole system was comparable. That was one of the bugaboos with us, was like, man, we can't tell it no. So if it wants to go straight to cash, right, it's going straight to cash. And some people might not like that, you know, time in the market, timing the market kind of thing. But there was also going to have to be a money outlay for the banks to, you know, give us the quote, unquote, okay to go and do this. So we just wanted to see if there was a temperature like, like what the, the client temperature of owning something like this was. And it was high enough where we said, okay, we can start diving in further. We proved to the bank like, hey, we can, you know, clients would like to have this in their portfolio. And when we did that, they. We started getting into those other eight, eight months of work and a couple months in, we're like, we did not, we did just did not feel comfortable with how the decisions in the algorithm and the outlay of what the computer was going to spit out. We just felt it wasn't ready. Is it here? Is it on the doorstep? Sure. Right, but not right now, so rather than, you know, doing something a little bit more extreme, we just need more time, and that could be years to continue to follow and watch under different circumstances, how this program would actually react. Right. So not just gonna roll it out and say, oh, well, I hope this goes well. Right. So in the conclusion, you know, is it friend or foe? Derek, what do you got, man? What do you think? Yeah, you know, I think. I obviously think it's a foe. You know, I've watched the Terminator movie, you know, at least a dozen times in the last year. It's one of my favorites. You know, so the skynet overtones are uncomfor, but, you know, it's. I think it's like. Like we said, and it's kind of like bitcoin. Right? When bitcoin first came out, I probably started getting questions about Bitcoin 7, eight years ago, and, you know, 90, 95% of the population said you were nuts to even think about it. You know, now it's almost a hundred thousand coin. So, you know, I. I would. I would think it would be on a similar trajectory, right? Where we're. We're kind of in the exploratory phase right now. We certainly wouldn't, you know, rule. Rule it out as a future potential friend, you know, but I think right now, we're still really just kind of learning about it. And I think even when it. When it gets up and running, if you will, kind of like bitcoin, you know, I still wouldn't, you know, if you're the biggest bitcoin believer ever, I still probably wouldn't tell you to put more than 10% of your overall net worth into bitcoin. You know, I would say it would probably be the same with an AI program, especially if you give it, you know, carte blanche to just make trades whenever it wants to. You know, that's. That, to me, is a. Scary isn't the right term. That is. It's just a step that I don't think anyone's ready to make right now. Yeah, you're giving a lot of. You're putting a lot of faith in something that's quote unquote new. Right? Right. Fairly untested. Right. The stock market's been open for almost 100 years. Right. Or maybe even longer than that band. What the. You know, what the heck, man? Like, and you got this thing that rolled out a year ago, like, hit the replacement button on all these. All these humans and get them out of here. I don't know. It just doesn't it shouldn't correlate with a lot of people because it's just too new and to who understands that stuff, like super, super smart people and you know, and AI is just a very unique, unique thing that just needs more time, I believe to be proven. Yep. But you know, friend, foe kind of thing. I'm with you, man. Like, I think, like, I think you kind of hit the nail on the head. I like what you said. Like, it's going to help speed up the decision making process for humans until it can have like critical thinking which could be weeks, months, years from decades from now till it can actually think like a human. That's where the Terminator stuff starts. Like, that's where it turns into a foe. Right. So, but you know, look how long it took self. You know, the Tesla with the self driving, you know, look how, look how long they've been testing and using and you know, trying to prove that out. Right. And it's probably safer than humans right now at this point, but no one's willing to, you know, put it out there in the mainstream, especially, you know, regulatory agencies, like the states, essentially. So, you know, I think, I think it has a long ways to go, but I do think, you know, we can start taking it seriously for sure and start, you know, learning about it more and using its strong points to help make maybe some, some trading decisions. Yeah, I, I'm more worried about like the betting against the AI or, or again these huge, like these computer programs start talking to each other and saying, hell, the goal is to make money. Okay, why don't you go short this thing? I'm gonna, I'm gonna, you know, go long. You shorted. And they figure out a way to suck literally all the money into one place. Yep. And. And everyone's broke. Like, seriously. Yeah, I don't know how, I don't know how you undo something like that because when it's done, you got a bunch of broke people running around. Everyone's broke, dude. Just ask AI for the money back. Yeah, like, hey, please give me my money back. Reverse, Reverse undo. Yeah, civil. Yeah, I'm gonna sue the AI. Robot and civil suit. Right. Anyway. All right, take us home, D. Yep. So, you know, probably still a long ways to go on, on AI but something that's, you know, definitely, we're, we're keeping an eye on a really good subject, so I'm sure we'll talk more about it as we go along. But if you guys have any questions or comments or show ideas, hit us up at info@swpconnect.com and we'll talk to you next week. The opinions expressed in the podcast are for general informational purposes only and are not intended to provide specific advice or recommendations for any investment, legal, financial or tax strategy. It is only intended to provide education about the financial industry. Please consult a qualified professional about your individual needs.