Choosing where to invest your hard-earned dollars can prove challenging — especially given the overwhelming amount of information out there for novice investors.. The rise of low-cost trading platforms has equalized access to many types of investments, but it remains difficult to determine which companies may perform well in the future.
Investment firm Charles Schwab has launched a new tool aiming to help. Unveiled in mid-March, the company’s stock list generator narrows down investment choices for the self-directed investor, identifying trends, opportunities and relevant companies in which to invest. Intended to help you select investments that align with your personal values and interests, Schwab’s sleek, AI-powered research tool may be just what’s missing from your investment arsenal.
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Charles Schwab Presents New AI-Powered Tool
In March, investment giant Charles Schwab launched its new tool for individual investors: a thematic stock picker powered by artificial intelligence. Thematic investing allows investors to base their investment choices on themes like sustainability, cybersecurity, pets and more, instead of following a more traditional, fundamentals-based method.
“In today’s highly competitive market environment, industries and companies are constantly seeking new avenues of growth,” the company states on its website. “That may mean capitalizing on unique and disruptive innovations or on shifts in demographics or consumer behaviors that may open new market opportunities.”
Investors may encounter difficulties in uncovering new opportunities in disruptive fields, so thematic investment tools can help discover those with long-term potential.
Schwab’s new tool focuses more on transformational trends than most, collecting data from hundreds of companies and ranking them in order of relevance. Powered by natural language processing (NLP), a component of AI that allows computers to read and process normal human language, the thematic stock picker is able to analyze and digest thousands of pages of annual reports. It combs through regulatory statements, patents and clinical trials, then narrows down which companies have the most exposure to a relevant theme and discards companies that are deemed too high risk or illiquid. The end result is a list of up to 25 stocks that match an investor’s chosen theme.
How Investors Can Take Advantage of Schwab’s Thematic Stock Lists
Thematic investing weights theme relevance higher than fundamentals, and so it may seem riskier as an investment method given that past performance and revenue are deemed less important when it comes to theme rankings.
But thematic investing can prove both powerful and helpful depending on your appetite for risk. Start by using thematic stock picks as a method for whittling down potential investment options. Disruptive ideas are hard – if not impossible – to capture just from a company’s annual report, but supporting these innovative companies can potentially lead to high returns in the future. Emerging trends can also make some industries more relevant for potential growth opportunities, and traditional sector research may miss picking up on those socially-driven cues.
There are many ways to invest thematically, including through thematic exchange-traded funds (ETFs) and mutual funds. Fidelity, for example, offers mutual funds that specialize in certain ideas: these range from transformative-medicine companies to renewable energies. Some of these funds average lifetime returns of more than 20%, although more recent numbers are markedly negative. Another example, the Ark Innovation ETF (ARKK), which specializes in disruptive technology, has returned 180.5% over the past five years, but it too has fallen an astounding 33% year to date.
Tools that allow investors to direct funds toward thematic investments are gaining in popularity, and Schwab’s latest addition aims to help investors by narrowing down the choices. The company currently offers a catalog of more than 40 thematic stock lists, searchable by keyword, company or theme name. The lists include details like price, day change and market capitalization, and Charles Schwab charges no fee to access them. In order to use the tool, you only need to have a Charles Schwab account.
Bottom Line
Investment firm Charles Schwab has recently launched a new thematic stock tool to help investors choose investment opportunities based on personal interests and values. The new stock picker uses artificial intelligence to comb through huge amounts of data and rank companies according to thematic exposure. Individual investors can take advantage of this tool by using it as a launching pad for company research, allowing them to narrow down potential investment opportunities and further capitalize on emerging trends.
Tips for Building Wealth
- Not sure what investments and strategies will help you meet your long-term goals? For a solid financial plan, consider speaking with a qualified financial advisor. SmartAsset’s free tool matches you with up to three financial advisors who serve your area, and you can interview your advisor matches at no cost to decide which one is right for you. If you’re ready to find an advisor who can help you achieve your financial goals, get started now.
- Use SmartAsset’s free investment calculator to get a good estimate of how to grow your money over time.
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