Is AI investing guaranteed win?

Lately, my friends have been buzzing about algo-rithmic and AI trading, how it’s now within reach for pretty much anyone. They’re convinced these mathematical models guarantee killer returns, all thanks to their precision and, you know, sheer complexity. Now, that sounds good on paper, but I’m telling you, we need to pump the brakes when it comes to trusting computers with our hard-earned money.

- KEITH LIM

Think about Long-Term Capital Management (LTCM). This was like the rock-star hedge fund of its time. We’re talking over $5 billion in assets back in 1998, and the founders? Nobel laureates Robert Merton and Myron Scholes, the guys who cooked up the Black-Scholes model — basically, the bible of options pricing. It was the financial equivalent of launching a tech startup with both Bill Gates and Steve Jobs at the helm.

Their whole game was arbitrage, using these crazy mathematical models to snag tiny price differences between similar assets. Picture this: their model spots Bond A at $101 and Bond B at $99, predicting they’d both hit $100 because, well, they’re practically twins.

And it worked. Like, really worked. From 1994 to 1997, LTCM was pulling in average annual returns over 15 percent—try beating that with your stock portfolio! And get this, in 1995 and 1996, they even cracked 40 percent! They were so sure their model was foolproof, they borrowed insane amounts of money, figuring nothing could go wrong — those mathematical formulas don’t lie, right?