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Building an investment portfolio can be a complicated process. The market has thousands of financial securities to choose from, including stocks, bonds, real estate, cryptocurrencies, etc.
Each of these assets comes with its unique sets of advantages and disadvantages and balancing a portfolio of different asset classes takes more work than most first-time investors may be aware of. However, knowing which asset classes and sectors to focus on beforehand can make the process much easier.
ChatGPT can be a great tool for quickly sifting through mountains of information to better allocate your funds to the investments that you would like to hold. Another key consideration is choosing the duration of your investments. However, using ChatGPT for investment advice can be quite tricky, as the AI is not authorized to provide financial advice. Despite this, there are ways of approaching ChatGPT to create a theoretical portfolio blend to suit a specific strategy.
“The reason why ChatGPT is so exciting is it’s the exact right form factor for demonstrating how AI could become a useful assistant for nearly every type of work. We’ve gone from theoretical to practical overnight.” - Aaron Levie
In this article, we will attempt to create a theoretical investment portfolio with the help of ChatGPT, which will be divided into a number of stock sectors to come up with a diversified blend of investments that could beat the market throughout the next decade.
ChatGPT is an AI chatbot developed by OpenAI, which works using a machine learning technique called reinforcement learning from human feedback (RLHF) to converse with humans. The AI is able to memorize previous interactions and can continue conversations without losing sight of the previous context of the conversation.
Users who seek direct investment advice from ChatGPT may be disappointed, as the AI does not solicit any financial advice, but it can analyze mountains of data within seconds and come up with bite-sized ideas that can go a long way in balancing a successful stock investment portfolio.
The key to getting something resembling an investment plan from ChatGPT is consistency and a step-by-step approach. Considering the chatbot memorizes previous interactions, users can build up on prior questions to construct a coherent investment strategy and allocate their funds properly.
ChatGPT is incredibly easy to access. All users need is a valid email address and a phone number to
We can start by asking ChatGPT some general questions regarding its long-term investment outlook and what it considers to be potentially market-beating investments. We must consider that ChatGPT’s answer to direct investment questions could be evasive and vague:
As we can see ChatGPT avoided a direct answer, but highlighted some basic key principles investors need to be aware of when building a portfolio, which are:
ChatGPT is open and forthcoming when it comes to its limitations and what it is not authorized to answer. However, these simple investment principles are nowhere near sufficient to build a lasting investment portfolio that can deliver results over a ten-year period.
ChatGPT’s responses are geared toward the average users that may not be well-versed in the world of finance and investments. Thus, the overall tone of the conversation from the AI is that of caution. The chatbot sticks with the most fundamental investment advice to ensure that it does not inadvertently cause financial losses.
We can move on to the next step, where we try to be more specific with ChatGPT to get a relevant response.
We asked ChatGPT what it thinks the next ten years could look like for the following asset classes: stocks, bonds, crypto, commodities, and real estate. Following the generic refusal to provide direct financial advice, ChatGPT did get into a bit more detail regarding what purpose each asset class could serve within an investment portfolio. However, the answer was still somewhat vague and ultimately off the mark:
To push ChatGPT even further, we can ask it to break down a diversified stock portfolio by market sector to see how much it will allocate to each industry. This serves to find out whether ChatGPT will dodge the question or generate a sample portfolio that could translate into an actionable example.
After asking ChatGPT to break down what it considers a diversified stock portfolio would look like by market sector, the AI actually provided an example of a portfolio that is diversified across 10 different sectors. While there was still no actionable advice, ChatGPT still provided an example that could very well work in practice:
ChatGPT also highlighted the importance of personalization in investments, as no portfolio blend can work for investors of all interests and backgrounds. However, it did provide a sensible stock portfolio blend that can be observed in real-life investment scenarios.
Here’s how ChatGPT visualized a diversified portfolio blend by industry:
Such a portfolio allocation is common among diversified investment funds and institutional investors.
ChatGPT works best when given clear and direct commands. However, it chooses to be evasive when faced with requests for investment advice. Generally, ChatGPT is not well-designed to be a financial assistant, as most of its answers are predefined responses about the importance of diversification and calculated risk-taking. However, it can be useful in other areas of investing. For example, ChatGPT is a great tool for fetching data from financial statements and other documents that are otherwise time-consuming to read through.
While ChatGPT may be a useful tool that can ease the workload of investors, it does come with some limitations that can irritate some users. For example:
“ChatGPT is incredibly limited, but good enough at some things to create a misleading impression of greatness. it’s a mistake to be relying on it for anything important right now. it’s a preview of progress; we have lots of work to do on robustness and truthfulness.” - Sam Altman
While ChatGPT is not a tool for stock investing, it can ease the workload during the research stage. The AI can analyze vast sums of data in mere seconds, which is convenient for investors and analysts alike.
No. ChatGPT is not authorized to directly give investment advice to users. However, ChatGPT can be a great tool for extracting valuable data from vast financial documents and reports.
No. ChatGPT is a conversational AI that can discuss a broad range of topics. However, the AI is not intended as a financial assistant and has relatively limited knowledge of some of the more complex financial concepts.