Artificial intelligence (AI) has changed the way the world works. Industries such as transportation, cybersecurity, entertainment, and manufacturing have seen AI drive efficiencies, and it’s no surprise that the financial industry is no exception.
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A recent episode of the Rich Dad Radio Show took a deep dive into how AI is changing the way we invest. Robert Kiyosaki, author of the bestselling book Rich Dad Poor Dad, spoke with Bert Dohmen of Dohmen Capital Research about the impact and potential of AI in investing.
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AI is going to be a big thing
Dohmen began the episode by saying that he expects the value of AI to surpass the dot-com bubble. AI will completely revolutionize industries because it can process terabytes of data and analyze it in seconds. For example, he said, experts could use AI to read thousands of cancer studies in seconds and summarize the results to treat patients much faster and more effectively than they could on their own.
But for Kiyosaki, this doesn’t mean you should invest in AI directly. He says he made a lot of money investing in oil and real estate because he studied and understood those industries intently. If you’re not familiar with the AI ​​industry and are constantly studying its evolution, you probably shouldn’t invest in AI.
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Common mistakes investors make
The question Dohmen Capital Research gets most often from people is, “What should I invest in?” Dohmen explains that his investment research firm is examining multiple exchange-traded fund (ETF)-based portfolios in its AI-related research to gain market insights.
A common misconception about stock value is that profits determine stock prices. Dohmen says profits don’t drive stock prices. He argues that stocks with the highest profits often fall the most because rising profits are an illusion. It’s important not to base your opinion on what other people are seeing.
Dohmen gives a personal example of why a stock’s profits and revenue aren’t always as important as many people think: During the dot-com bubble, he bought a stock with no profits or revenue. The stock’s initial public offering (IPO) price was around $2.50, but Dohmen saw the price rise to nearly $120 and began seriously considering buying.
It seemed like a great stock, but sales were slow and he was worried. Still, he decided to buy it, and the stock continued to rise in value until it reached $950 and he sold it.
If your opinion on the financial markets is the same as everyone else’s opinion in the news and other financial channels, you will not have a chance to succeed. To make money in the stock market, you need to be in the minority. Using AI-driven research, individuals and businesses can make more informed long-term investment decisions than simply following what the media feeds them.
Using AI to track money
Kiyosaki and Dohmen agree that knowing when to sell stocks is the most important part of being a successful investor. Perhaps not surprisingly, AI can’t accurately predict the future. But there is a way his company uses AI to determine when it’s best to sell: The investment firm uses AI to analyze the stock market through pattern recognition.
Dohmen explains that his company uses AI to predict the best time to sell through money flow – the amount of money moving in and out of a stock. He says the only thing that really changes the price of an asset is supply and demand. If supply exceeds demand, the stock price falls. Similarly, if there is a lot of demand for a stock but only a limited number of shares, the value rises. So money flow is an important variable to monitor.
Dohmen’s firm’s focus on cash-flow analysis helps inventors determine when to sell based on AI predictions. When the inflow of cash starts to subside, it can tell that insiders are selling shares and it’s time to exit.
Final Take
Traditional ways of tracking and investing in stocks are fast becoming obsolete. Leveraging AI-based research that recognizes patterns in cash flows, investors can quickly and easily identify the best time to sell stocks for profits, instead of guessing how the market will react.
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This article originally appeared on GOBankingRates.com: “Rich Dad” Robert Kiyosaki: How AI will impact the investing world
