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Fundamental vs. Speculative Artificial Intelligence & Deep Learning Investments
When deciding where to invest, a certain level of speculation is always involved. Investors read market trends and consumer preferences with an eye toward historical context and future growth as they formulate a hunch for where their investment will produce the greatest return. But speculative investing stops there, at the hunch, with little data to back up the investment decision. Speculative investing can have high payouts if certain milestones or uncontrollable circumstances take place, but can also fail miserably if those conditions aren't met. It's a gamble. Fundamental investments can also lead to high payouts, but are based on thorough research and data analysis.
Within industries focused on innovative technology or services, speculative investment might appear to be the only way to approach new opportunities. This has played out, for example, with cryptocurrency, wherein real data needed to make an informed investment decision was lacking. Many conditions have to be met for cryptocurrencies to become a valuable investment, with regulation, security, social acceptance, and trading patterns being just a few of them. Cryptocurrencies, though no longer new, are still considered speculative investments.
More recently, brain-computing interfaces (BCI) have been presented as the next frontier in human-technology interaction. Due to its nascency, there is very little data available to inform a fundamental investment decision and many conditions will need to be met before BCI becomes a secure investment. Will BCI be met with security issues and a lack of consumer trust? Will accessible platforms be developed and utilized? Will BCI remain a niche technology or infiltrate the mainstream? It’s all speculation.
Artificial Intelligence (AI) and Deep Learning (DL) generally have the potential to fall into that category of speculative investment due to their relatively early stage of maturity. AI/DL are not only new technologies, but are being employed in unheard and unthinkable ways that leaves many without the data they need to make a sound investment decision. Because speculative investments fall prey to trends and flashy ideas, AI/DL have the potential to encourage speculation. However, data does exist for investors interested in the AI/DL industry to make sound, fundamental investment decisions in an early growth stage market.
TrueShares portfolio management utilizes fundamental data and analysis tools to determine the holdings in our AI and Deep Learning ETF (LRNZ). Our analysts still look for innovative technologies with significant competitive advantage, but they go many steps further in their research. To confirm an investment hunch, diligent qualitative and quantitative research is conducted to develop detailed company analyses before investment decisions are made. The selection process for determining the LRNZ holdings favors secular-growth companies with long-term growth potential, not cyclical-growth companies with a risky chance at eventual return. Continual monitoring and adjustment in response to volatility in the overall market allow TrueShares portfolio management to manage a reasonable amount of risk in the portfolio as a whole. While there can be legitimacy and value to speculative investments, TrueShares' investment strategy for AI/DL is all about the fundamentals.
Learn more about TrueShares AI & Deep Learning ETF (LRNZ) at www.truesharesetfs.com/lrnz.
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