4 Ways to Build an Investment Portfolio Using AI

Using AI to Build a Portfolio

When it comes to building a portfolio to fit your investing goals and risk tolerance, there are infinite possibilities.

Consider a young investor looking to build a growth portfolio - they might be trying to grow a nest egg over the long term. Or consider an investor looking to build an income portfolio as a supplement to the loss of income after retirement. They might have completely different needs, and therefore completely different portfolios.

And for investors who are new to the stock market altogether, building a portfolio can seem impossible. Where do you even start?

With the advent of AI and natural language learning models, everyday people with virtually no investing knowledge can now easily create custom-built portfolios, tailored for their investment goals.

What if I’m new to AI investing?

You likely have questions about how investing with AI works. Before ChatGPT came on the scene, did you ever really think about generative AI? That was only about a year ago.

When it comes to Magnifi, think of it as having an AI investment co-pilot. It doesn’t tell you what to invest in, but it will show you ideas, build recommended portfolios, and even just answer questions about the endless amounts of financial jargon. Then you can review and evaluate the recommendations to confirm it matches your desired outcomes.

How can AI help the everyday investor utilize AI in their investing? Here are 4 steps to implement AI in your portfolio construction.

1. Explore Strategies

Ask 100 people how they built their portfolio or what stocks they like to invest in and you’ll get a 100 different answers, some may even give you unsolicited advice. However, none of this is to say this is how you must invest.

As if texting your financial advisor friend from college, tell Magnifi you wish to “explore portfolio construction” and your investing assistant will get you started on the right track to building your personalized investment portfolio.

Magnifi prompt of portfolio construction

The next step requires picking which of the above, or other investment strategies you can think of, best fits your goals.

2. Building an Income Portfolio

As we mentioned before, you can have two individuals at different stages of their lives, which will lead to two different portfolios.

Those closer to retirement, building a portfolio with a focus on income-producing securities like bonds or dividend stocks compared to equities could be a more realistic fit.

This strategy is geared toward generating steady income, typically through dividends or interest payments. It's ideal for investors seeking more “predictable” returns. In addition to seeking added income, these investors more than likely are risk averse as they have no interest in chasing higher risk investments at this stage of their financial journey.

Say your goal is to preserve your capital as much as possible, as well as add to your portfolio a steady stream of income from energy stocks yielding more than 6%, Magnifi can create a tailored portfolio of stocks that meet that criteria.

This kind of goals-based investing where the portfolio is built with the outcome in mind is how an investor can gain more confidence and understanding of what securities should be added to their portfolio.

3. Building a Growth Portfolio

Consider the younger investor. After determining you're interested in building an aggressive growth portfolio, you then need to determine where that growth might be. But don't worry, you’re not alone.

Investors often build out their growth portfolio by finding the right mix of large-, mid-, and small-cap growth stocks to buy.

Magnifi prompt of portfolio construction

Side note: Large-, mid-, and small-cap are terms used to describe the size of the company whose stock you are considering purchasing. Here’s a little cheat sheet below:

Table showing market capitalization sizes for stocks

An example of a large-cap stock is Apple (AAPL), while an example of a mid- and small-cap stock could be Ambarella (AMBA), a chip maker, and Ally Financial Inc. (ALLY), a financial services company.

What would a portfolio of large- and mid-cap stocks look like? This takes us to our final step. Choosing and buying our preferred investments.

4. Building a Value Portfolio

Finally, we can’t forget our value-focused investors, where quality stocks, whether they pay dividends or not, are the focus of their investment strategy.

As the name suggests, a value investor is someone who is pouring through earnings reports and company financial statements to find where the true value in the stock market lies. They are interested in investing in companies that have long track records of success, promising growth potential, and most of all, a health balance sheet.

Perhaps you’re aiming to build a mid-cap only value portfolio, but want a minimum projected return of at least 6%, Magnifi can put a list of stocks together that investors can then buy all or part of this hypothetical value portfolio.

This is just another one of the many ways investors can use AI to build a portfolio personalized to wherever you’re at in life’s journey.

Investing with Magnifi

These are just a few of the ways you can approach portfolio construction. You can also build portfolios around a goal, find investments that match your personal values, find investments that hold your favorite brands, and other strategies.

With an AI assistant at your side, you have the freedom to explore the strategies that fit you best, and then learn by doing.

If you’re interested in seeing how AI can help you build confidence in your investment approach, check out the link below and get started with Magnifi today.

Try Magnifi Today

Click here to invest with Magnifi.

Disclosures:

The information and data are as of November 30, 2023, unless otherwise noted and subject to change. This blog is sponsored by Magnifi.

This material is provided for informational purposes only and should not be construed as individualized investment advice or an offer or solicitation to buy or sell securities tailored to your needs. This information covers investment and market activity, industry, or sector trends, or other broad-based economic or market conditions and should not be construed as investment research or advice. Investors are urged to consult with their financial advisors before buying or selling any securities. Although certain information has been obtained from sources believed to be reliable, we do not guarantee its accuracy, completeness, or fairness. Past performance is no guarantee of future results. This content may not be reproduced or distributed to any person in whole or in part without the prior written consent of Magnifi. As a technology company, Magnifi provides access to tools and will be compensated for providing such access. Magnifi does not provide broker-dealer or custodial services.