“Neural networks can be great in some areas, but they can also lead to overfitting of models. What that means is if you train a model on a specific set of data, it might be very good at explaining that data—but then when you actually put it onto the real world and its predictions, it actually doesn’t do very well.”
- Mychal Campos, Betterment’s Senior Director of Investing.
Robo-advisors are a class of financial advisors that give financial advice with moderate to minimal human intervention but based on algorithms and mathematical rules, usually AI and ML programs. Betterment is one of the world’s largest robo-advisors, but its consumer-focused investment offerings use almost no machine learning.
Instead, according to Campos, Betterment uses a lot of math and statistical simulation, mostly with two different models (the Monte-Carlo simulation and the Black-Litterman model) averaged together.
