Online trading platform eToro (NASDAQ: ETOR) has introduced 11 new investment portfolios powered by artificial intelligence, built on the analysis of its retail trading data, the company announced today (Wednesday). However, the entry threshold may be too high for many small investors.

eToro Launches AI-Driven Investment Portfolios Using Retail Trading Data

The Alpha Portfolios represent eToro's attempt to democratize quantitative investment strategies typically reserved for hedge funds and institutional investors. The offerings utilize machine learning algorithms to analyze patterns within eToro's database of retail trading activity from its 40 million registered users worldwide.

"We're excited to give our users access to exclusive quant-driven strategies typically used by hedge funds and institutional investors with the new Alpha Portfolios," said Shay Heffetz, Director of Quantitative Investment Strategies at eToro. "These kinds of strategies have long been out of reach for retail investors, as they normally have high entry barriers, costly management fees, restrictive lock-up periods and less transparency in terms of asset allocation."

According to the company, this dataset provides insights unavailable to traditional fund managers, according to the company. The machine learning models identify patterns and behavioral inefficiencies within this data pool to systematically adapt investment strategies aimed at generating alpha, or returns exceeding market performance.

Portfolio Offerings

The eleven portfolios fall into two main categories. Directional strategies include Momentum L-S, which takes long positions in high-momentum US stocks while shorting underperformers, and OutSmartNSDQ, a technology-focused approach targeting Nasdaq outperformance with downside protection.

Market-neutral strategies comprise Sector Neutral, designed for low market correlation and consistent returns, and Sector Gurus, which targets volatile but high-performing S&P 500 stocks. Both neutral strategies offer leveraged versions with 2x exposure.

NasdaqAI-Inverse provides a defensive option by shorting 50 Nasdaq 100 stocks identified as likely to decline during market downturns.

The remaining of the 11 new portfolios were not described in the press materials provided by eToro.

High Entry Barrier?

Each portfolio undergoes monthly rebalancing using updated data and AI signals to maintain alignment with market conditions. Minimum investments begin at $10,000, with no management fees, performance fees, or lock-up periods imposed on investors.

The mentioned amount may be too high for many investors. However, it’s worth noting that with this product, eToro aims to compete with traditional asset managers. It offers retail investors institutional-style strategies that would normally be unavailable to them or would require significantly higher entry thresholds.

eToro Wastes No Time After IPO

Although less than a month has passed since eToro’s rather strong IPO on Wall Street, the now publicly traded company is moving quickly to please shareholders. The recently announced AI-driven portfolios mark another product update in just a few weeks.

Last week, the fintech launched a recurring buy feature for stocks, ETFs, and cryptocurrencies, expanding its offering of so-called “passive investing” tools. Around the same time, eToro also opened a new physical branch in France to offer popular savings, insurance, and retirement products in the local market.