Given the growth in Artificial Intelligence (AI)-based trading in advanced economies, Geojit Financial Services is keenly observing all technological breakthroughs and is open to adapting to them. Jones George, the company’s Executive Director says that AI is certainly a game changer with the usage of tools like machine learning and algorithmic predictions for trading to analyse financial data and market forecasts. It also does real-time deciphering of large volumes of data from various sources.
Quoting a US study, he said the size of the Algorithmic Trading Market is expected to grow from $15.77 billion in 2023 to $23.74 billion by 2028, at a CAGR of 8.53 per cent.
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How does AI alter both full-service and discount broking segments? What are its prospects as well as challenges?
Innovations will definitely enhance productivity. It will reduce the cost of operations and boost the system’s predictability and reliability. Compared to humans, AI will take less time for research and analysis. It will help limit human errors and interventions.
We are more interested in how AI can help deliver better products and asset allocation to customers. The majority of our clients are long-term investors. They are with us, and our purpose of existence is to help them generate wealth.
Keeping up with that, we are studying different predictive models to offer personalised asset allocation recommendations. AI can also be used effectively in other parts of the business. We have started testing AI for internal training. With various complexities involved, AI helps to release timely training materials and help our colleagues get them certified on internal tests.
AI will always be a work in progress; hence, it will be difficult to highlight the challenges unknown.
Also read: ChatGPT can decode Fed speak, predict stock moves from headlines
What are your plans to woo new age customers when many are keen on deriving maximum profit through short-term investments?
We are clear on our vision: to be an investment partner to our clients, and our mission is to help them generate wealth. Our investment recommendations are aligned with clients’ financial objectives. As a policy, we try to discourage short-term investments and derivative trading among those who are not trained for it.
We have seen long-term investors generate more wealth consistently than short-term traders. There are no shortcuts to wealth creation in the stock market. I would say the safest and most promising way to wealth creation is to start with SIP.
A section of retail investors, especially the younger generation, tend to invest blindly following tips from ‘fin-fluencers’ of social media. What is your advice to them?
This has been one of the biggest challenges. As a 36-year-old company, we have seen many ups and downs in the market. Influencers always existed, just that now they are more vocal through social media.
In the past, during every Bull Run, a set of influencers would arise. Those who blindly follow them, tend to make some money, thanks to the bull market. In a bear market, everyone, including the influencer, would lose money.
It is extremely difficult to convince someone to invest in the market once they have lost faith entirely. Thanks to SEBI, this scenario is changing. Steps are being taken to remove all misleading and false investment advice from social media platforms. Still, there are some gullible investors who fall prey to false promises.
Also read: AI won’t beat the market any better than wall street
What strategies do you recommend to new-age or first-time investors?
If you are a first-time investor, the ideal product for you would be a mutual fund. Speak to any MF distributor or advisor and understand the product and its nuances. It will also help you realise the amount of time and effort it takes for a fund manager to identify a good stock.
Once you know that, it will help you to identify good stocks and make direct equity investments on your own. Start with putting a fixed amount of money into a SIP. Most importantly, stay away from trading and derivatives unless you gain the knowledge and right reasons to do so.
There are talks about ‘Hybrid Brokerage’ firms. Do you have plans to adopt such a model?
Geojit has been a hybrid brokerage since 2000 when we launched online trading for the first time in India. When we ventured into client-facing digital platforms, the objective was to augment human relationship and not to displace it. Since then, all of our products have been made available online and offline simultaneously. We are not in the business of transactions rather we want to be an investment partner to our clients. In fact, more than 80 per cent of trading is done online, and so is our account opening.
Many ‘new age’ broking firms charge an opening fee saying they only want serious traders. Is it a healthy approach?
These are subject to the business models of the respective company. In principle, while we encourage maximum retail participation in the equity market, we generally discourage those who enter the market to start trading in derivatives. The overheads are there. Besides the leading discount brokers, many may be finding it difficult to build a viable business model around it.
But remember, a serious trader is not born in a day. It is an evolution. So, the industry must facilitate maximum retail participation.