Artificial Intelligence can (AI) revolutionize the world of finance and potentially make individuals wealthier
As businesses accelerate their AI initiatives, it raises the question of whether human financial advisors will become obsolete in the coming years, with computers offering faster and more cost-effective alternatives.
To evaluate the likelihood of this scenario, Dailymail.com turned to ChatGPT for answers to four fundamental investment-related questions and sought insights from financial experts to analyze the results.
Question: How do I start investing?
ChatGPT responded with a comprehensive 538-word answer, providing 11 steps for beginners to consider. The steps included setting financial goals, establishing an emergency fund, educating oneself, determining risk tolerance, starting with a retirement account, opening a brokerage account, determining asset allocation, investing in low-cost index funds or ETFs, monitoring and rebalancing the portfolio, and staying informed and adaptable. Notably, ChatGPT's response included disclaimers urging readers to consult with a financial advisor for personalized advice tailored to their specific circumstances.
Wealth manager Eric Mangold, based in New York, commended ChatGPT's advice as broad-based and suitable for self-directed beginners. He emphasized the importance of education and understanding risk tolerance. However, financial planner Marissa Reale noted that the advice lacked personalization, suggesting that seeking personalized advice is crucial in personal finance. She highlighted the need to consider individual factors such as high-interest debts and the client's specific circumstances when establishing an emergency fund.
Question: Should I invest in stock Nordisk?
ChatGPT's response began with a strong disclaimer, clarifying that it cannot provide personalized financial advice or specific investment recommendations. It then outlined seven general steps for considering investments, including researching the company, assessing industry and market conditions, analyzing financial indicators, considering valuation, understanding risks, diversification, and seeking professional advice.
Anthony Martin, CEO of insurance firm Choice Mutual, cautioned against expecting specific investment advice from ChatGPT due to the lack of transparency in how the model processes data. He highlighted the potential bias and inaccuracies that could arise from relying on ChatGPT for investment decisions. However, Mangold praised ChatGPT's guidance, acknowledging its value in providing a structured approach and understanding risks.
Question: What asset classes could overperform the market in the next 10 years?
ChatGPT's response, spanning 356 words, began by acknowledging the challenge and uncertainty of predicting asset classes' performance over the next decade. It emphasized that investment performance depends on various factors such as economic conditions, geopolitical events, technological advancements, and market dynamics. The advice then categorized potential areas for potential outperformance, including technology and innovation, emerging markets, healthcare and biotechnology, renewable energy and sustainable investments, and Environmental, Social, Governance (ESG) factors.
Reale criticized ChatGPT's response for lacking detail and personalized advice that a human advisor could provide. Mangold concurred, stating that predicting market trends and asset class performance is challenging, even for human advisors. He emphasized the importance of having a solid savings and financial plan to navigate market fluctuations.
Question: Where should I invest $10,000 right now?
ChatGPT's generic advice focused on the importance of diversifying one's portfolio to manage risk effectively. It suggested considering investment goals, time horizons, and risk tolerance when allocating the $10,000 across different investment options.
Reale highlighted the importance of considering the client's age, as it would significantly impact investment recommendations. Younger clients might be advised to adopt a more aggressive investment strategy, while older clients' needs and short-term financial obligations should be taken into account. Mangold echoed these sentiments, emphasizing the need to assess factors such as debt, emergency fund requirements, and short-term financial needs before making investment recommendations.
In summary, while AI-powered models like ChatGPT can offer valuable insights and guidance, they are not a substitute for personalized financial advice from human advisors. Experts noted the importance of personalization, considering individual circumstances, and the limitations of predicting market trends. Collaborating with a human advisor remains essential for tailored financial advice and making well-informed investment decisions.