Business / Tech

How Front built an AI-driven platform to aid casual investors

artificial intelligence AI

Although the secret sauce behind Front’s AI is proprietary, they tell users what information gets included in its analysis.

*This is a guest post, the thoughts and opinions expressed are those of the authors and do not reflect on Techaeris or its staff.

Ever since the dot com economic boom in the late 1990s, the tech sector has been the US economy’s primary economic growth engine. It’s such a strong point that even a global pandemic couldn’t prevent US tech stocks from pushing markets to record highs recently. But the sad reality of all of that growth is that the vast majority of the gains created in that time have gone to a tiny sliver of people at the top of the economic ladder and not the casual investors.

Estimated reading time: 5 minutes

The result was that US billionaires gained over $1 trillion in wealth during the pandemic. And that wasn’t an anomaly. Because investors in the stock market require that you have the time to follow the market and the money to invest in it, only about 55% of Americans do it. But right now, there’s a unique convergence of events that could change that.

The first event is the latest stimulus package sending a fresh round of cash into most Americans’ bank accounts. And the second is the emergence of Front, a tech company intent on helping everyday investors leverage the power of artificial intelligence to grow their wealth in the stock market. Here’s a look at what Front’s new platform does, the technology that’s behind it, and why it could be a game-changer for casual investors looking to increase their odds of turning a profit.

The Basics of the Front Platform

Put simply, Front offers casual investors an app-based platform to aid them in making imaginative and timely investments in the stock market. They’re not a broker and have no direct control over individual investors’ accounts. Instead, they provide data-based tools that make it possible for investors to make smarter decisions without spending hours or days researching respective companies to invest in. In other words, they’re like an investment copilot – giving advice that investors can use at their discretion.

The core of those tools is something they call a Front Investment Score (FISCO). It’s an AI-powered stock appraisal system and makes it possible for casual investors to evaluate companies without comprehending the nuances of things like P/E ratios, quarterly earnings estimates, and technical evaluations. By rating investment portfolios with a single, easy-to-understand number, it helps investors build stronger, diversified portfolios.  And the whole thing’s powered by a custom-built proprietary AI engine.

artificial intelligence AI How front built an AI-driven platform to aid casual investors

Front’s AI Technology

Although the secret sauce behind Front’s AI is proprietary, they tell users what information gets included in its analysis. It considers multiple data points on the companies included in a user’s investment portfolio and evaluates the portfolio’s strength as a whole. A single score’s simplicity is intentional; it puts the data into an easily understood format, regardless of investment experience. The factors considered include:

  • Recent company financial projections
  • Recent SEC financial results filings
  • Sentiment scoring of news reports about the company
  • Short-term share price movements
  • Stock compatibility with the user’s portfolio

What’s most interesting about Front’s application of AI to this use case is how it blends hard financial data points with things like media sentiment to produce an evaluation consistent with human evaluation. Because the market is rarely compatible with a data-only approach and is far more irrational than it should be, conventional AI would be at a disadvantage under normal conditions. But by including things like sentiment into the mix, Front aims to make its AI “react” as a human investor might.

That makes it much more likely that users will be able to capture gains from things like the recent Reddit-fueled rise of GameStop. In that situation, no rational analysis of the business’s underlying financial condition would have tipped off a casual investor to buy-in. But an AI with split-second access to online sentiment data might have spotted the trend before it ever took off, letting investors capitalize on the meteoric – and irrational – surge in GameStop’s price.

And on top of all that, Front’s AI uses predictive modeling to help investors identify good buys based on small price movements in real-time. It’s the same kind of strategy that most algorithmic stock trading systems now use. And those have been the secret to large investors’ success in recent years. So, Front putting that information into the little guy’s hands is a big deal that can’t be overstated.

The Proof is in the Pudding

The most important thing about Front’s approach is that it may be used as a bolt-on addition to a user’s stock trading solution of choice. That means people using apps like Robinhood or conventional brokers like TDAmeritrade can connect their existing accounts to take advantage of the valuable tools and data it provides them.

And that can yield a significant advantage. In a six-month beta test conducted by Front, users posted some shocking results. On average, users gained about 55.39% on their Front-suggested portfolios, compared to about 30% for users on other platforms during the same span. But what’s most important about those results is that the users on those other platforms underperformed the benchmark S&P 500 by a small percentage. That means the average investment platform was barely on par with an all-index fund portfolio while Front overperformed by a large margin.

Now, it’s too soon to say that the early success will be sustainable, but it’s a perfect sign that Front’s AI system might be well-tuned to the market’s pulse. That makes it at least worth a look for casual investors. And suppose it continues to work as advertised. In that case, Front will have leveraged their AI to strike a blow for the little guy, leveling the playing field and making it possible to turn a small starter portfolio into a wealth-generating system.

It would also mark the first time in a long time that the US’s tech sector started to yield financial benefits to those other than the very wealthy. And that would be a welcome change to the status quo indeed.

To Top