ChatGPT and AI have exploded in popularity. (Photo by Lionel Bonaventure)
ChatGPT and generative AI have exploded in popularity. You can use ChatGPT to recommend movies, offer travel plans, and even write songs in the style of Dolly Parton or Taylor Swift. But should you use ChatGPT to help with your investing decisions?
ChatGPT has an extensive knowledge of niche finance topics and can explain them with surprising accuracy — most of the time. So why not use it to help make decisions when you construct your personal portfolio? Investors who are considering using ChatGPT should be aware of the benefits and pitfalls before doing so.
How ChatGPT Can Help Investors
General research.
ChatGPT is a great tool for research, much like other notable financial sites like Forbes.com, The Wall Street Journal, and Yahoo! Finance. It can provide definitions to finance terminology, explain investing strategies, and can even describe the tax benefits of a traditional 401(k) plan. Research, however, should always rely on many sources. In the same way investors should not trust Wikipedia to always be accurate, they should not always trust ChatGPT, regardless of how confident ChatGPT is in its responses.
Writing code.
For the more technically inclined investors, ChatGPT has an incredible ability to write code in many programming languages. With some basic programming knowledge, ChatGPT can help investors write code to chart stock returns, build portfolios, and visualize performance.
How ChatGPT Can Hurt Investors
Reliance on old data.
The free and publicly available version of ChatGPT has not been trained on more recent history. Thus, it has no understanding of events after early 2022. Financial markets can change dramatically very quickly, and how you construct a portfolio should reflect current conditions regarding inflation, interest rates, consumer sentiment, and the economy.
Responses can be (confidently) incorrect.
“What were the best stocks to hold in 2020?” may seem like a reasonable question to ask ChatGPT. Yet, ChatGPT responds: “Companies involved in vaccine development and healthcare solutions were in the spotlight. For example, Moderna and Pfizer
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ChatGPT is also particularly bad at math since it is a language model and not a calculator. You can try this for yourself by asking it to do multistep problems that require a series of simple calculations. Certainly, its problem solving abilities will improve in time, but for now users should exercise extreme caution when asking ChatGPT to work problems.
In Conclusion
There’s a cautionary tale here: if ChatGPT does not yet fully understand and accurately comprehend the past, why should investors trust it as we make decisions about our financial future? That said, ChatGPT has only been widely available to the public since late 2022, and we can expect its technology to be vastly improved in the months and years to come. To its credit, ChatGPT often warns users when asking for financial advice and will frequently refuse to give explicit recommendations. Investors should strongly consider using it, cautiously, as an additional tool when it comes to investment analysis.
