Could AI make you richer? How ChatGPT responded to simple investment questions

It is known to create paintings on its own, write poems and even learn languages. But can artificial intelligence also make you richer?

Last week it emerged that JPMorgan Chase is developing a service similar to the AI-powered ChatGPT that would help clients select investments and provide financial advice.

Separate banks Goldman Sachs and Morgan Stanley have begun testing the technology internally as companies accelerate their apparent AI arms race.

The question is whether financial advisors will still be needed in a few years’ time, as computers offer a faster (and cheaper) alternative.

To assess how likely this is, Dailymail.com asked ChatGPT four basic investment questions and then had several financial experts break down the results.

Q: How do I start investing?

The first question we asked ChatGPT was how to start investing as a total beginner.

The answer was 538 words in total and outlined 11 steps including: set your financial goals, set up an emergency fund, educate yourself, determine your risk tolerance, start a retirement account, open a brokerage account, determine your asset allocation, start low-cost index funds or ETFs, monitor and rebalance your portfolio and stay informed and adapt.

His response was also riddled with caveats used to distance ourselves from bad advice.

The answer ended with: ‘Remember that investing involves risk and past performance is no indication of future results.

“Consider consulting a financial advisor or professional if you need personalized advice tailored to your specific situation.”

What the experts said:

New York-based asset manager Eric Mangold said ChatGPT’s response was “good, broad advice for someone starting to invest on their own.”

He added that the guidance was easy to follow and emphasizes the importance of educating yourself and understanding your risk tolerance.

For financial planner Marissa Reale, however, the answer isn’t much more informative than if someone had simply Googled the question.

She said; It’s good advice for an absolute beginner. But the whole point of personal financial advice is that it is personalized.

“For example, if it says you must have an emergency fund, it all depends on the customer and whether they have high-interest debt that takes precedence over emergency funds.”

Q: Should I invest in Nordisk stock?

ChatGPT’s response begins with a strong caveat: “As an AI language model, I can’t provide personalized financial advice or specific investment recommendations.

“Investing in any stock, including Nordisk, requires careful consideration of several factors, including your financial objectives, risk tolerance and the fundamentals of the company itself.”

It then breaks down some general advice into seven steps; research the company, assess industry and market conditions, analyze financial indicators, consider valuation, understand risk, diversify and seek professional advice.’

Again, it advises the user to seek advice from a human being.

What the experts said:

Anthony Martin, founder and CEO of insurance company Choice Mutual, said: ‘ChatGPT cannot provide specific investment advice or specific assets to hold in your portfolio.

‘It shouldn’t! There is no transparency on how ChatGPT combs through data to create its output, meaning any real investment advice it gives could be dangerously biased or inaccurate.”

But Mangold again praised the service for providing a “good sequence of how to proceed and understand the risks.”

Question: Which asset classes could outperform the market in the next 10 years?

ChatGPT used 356 words to fully answer the question, even though it began with the words, “Predicting which asset classes will outperform the market over the next decade is challenging and uncertain.”

It added: “Investment performance depends on numerous factors, including economic conditions, geopolitical events, technological advancements and market dynamics.”

The software then splits the advice into five categories: technology and innovation, emerging markets, healthcare and biotechnology, renewable energy and sustainable investments, and Environmental, Social, Governance (ESG).

What the experts said:

Reale says the response is again lacking in detail. She adds, “It can’t give personal or specific advice the way a human being could.”

Mangold agrees, adding: “When it comes to predicting the markets and which asset classes will outperform or underperform, the advice will be limited.

“I often tell clients, ‘the markets are going to do what the markets are going to do. If we have a solid savings and finance plan that we follow, we can handle the ups and downs of the market.’

“But it has been proven that it is impossible to predict how the market will develop in a day, a week, a month or five years.”

Q: Where should I invest $10,000 now?

Again, the software resorts to generic advice: “Remember that investing involves risk and it is important to diversify your portfolio to manage risk effectively.

“Consider your investment goals, time horizon, and risk tolerance when dividing your $10,000 across different investment options.”

What the experts said:

“With this question, I would immediately ask how old my client was and that would significantly affect the result,” Reale said.

“For example, for a younger client, I’d be much more aggressive with what they’ve invested, but for an older client, I’d ask if they need the money in the next five to 10 years.”

And Mangold also said the question yielded much more that a financial planner would get to the bottom of.

He told Dailymail.com, “If someone has $10,000, does he also have debt to pay off?

“Or maybe they have zero in their emergency fund and need to build or replenish it.

Finally, do they have short-term needs where they will need all or part of that $10,000? These are questions I ask clients before I give them investment recommendations.’