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It has the ability to get you quick answers, but many investors don’t know which questions to ask or the specific terminology to use in the first place, says Nick Holeman, director of financial planning at robo-advisor Betterment. And even then chatbots will sometimes give wrong or inconsistent answers.
“There’s no question that AI has the potential to reshape financial services, but it’s not ready to manage your money on its own just yet,” he says. He adds that today’s large language models (LLMs) are “impressive, but with decisions as important as your financial nest egg, you should be careful.”
Another problem he has seen is inconsistent assumptions. For example, the LLM might use 2% inflation in one calculation, and in the next use 3% inflation, or it might include the cost of books in one college forecast but only tuition in the next. When contacted for comment, the communications team at OpenAI—the parent company of ChatGPT—pointed to the company’s terms of use, which includes that “output may not always be accurate” and that users shouldn’t rely on the output “as a sole source of truth or factual information, or as a substitute for professional advice.”
The American public seems unlikely to heed such cautions. The share of U.S. adults who use the tool has roughly doubled since the summer of 2023, with 34% saying that they have used it at least once, according to a survey published by the Pew Research Center in June. A survey from Experian published last year found that nearly half of its 2,011 respondents have used or are considering using generative AI tools to help with managing their finances; 67% of Gen Zers and 62% of millennials say they already do so.
To be sure, ChatGPT can come in handy when it comes to explaining investing terms or basic strategies, like the value of a 60/40 portfolio or how to dollar-cost average. It can spit out the top S&P 500 exchange-traded funds (ETFs) by assets under management or give you a list of some of the leading technology stocks on the market. But even in this case, you should double-check your work with a reliable source, since ChatGPT can still share incorrect information. In a study published earlier this year, the Tow Center for Digital Journalism tested eight generative search tools including ChatGPT and found that the bots offered up incorrect answers to more than 60% of queries. The study also found that the chatbots tended to be bad at declining to answer questions they didn’t have the correct answers to, and instead offered wrong or speculative answers.
Vasant Dhar, a professor of data science at the NYU Stern School of Business, says that to really get value out of the tool “you have to have the chops to evaluate what ChatGPT is telling you,” especially if you’re actually going to act on any of its recommendations.
Some investors, like 25-year-old John Ninia, originally from Long Island, N.Y., do have those chops. Ninia has been putting money to work in the market since he was 16, and when he graduated college, he worked as a financial analyst at Mobius Investments until more recently becoming a director at the hedge fund. His days consist of scanning for stocks with key metrics, understanding what makes a company stand out from the crowd and who its competitors are. In recent years, he’s tapped ChatGPT to help.
“It can explain it to you in a way that you can more easily understand and you can ask questions,” says Ninia, who is based in Dubai, adding that the AI tool can also easily pull up price-to-earnings ratios, potential returns on investments, information about company executives and more. “Once you have this information that it can gather much quicker than anyone could, you can compare the three or four companies with each other and make better decisions.”
Ninia says the tool is so useful, he has used it for personal investments. During the recent tension between President Donald Trump and Federal Reserve Chair Jerome Powell, Ninia wondered whether the president’s pressuring the Fed to lower rates would work and—if so—whether home-building and buying will rev up as people look for lower rates. He asked ChatGPT for the names of the three largest home builders in the U.S., along with their financial information. He ended up investing in a group of those stocks that had the lowest valuations compared with the revenues they were generating, among other positive financial measures.
Eventually, AI tools may be able to help us all invest like Ninia—and many companies are already looking to tap the technology to give everyday investors a leg up. Investing app Public.com, for instance, has Alpha, which provides investors with AI-powered summaries and recaps of assets via news alerts, a chat function to ask questions about assets in your portfolio and more. Stephen Sikes, Public.com’s chief operating officer, says common uses of the tool include recapping earnings calls and understanding broader sentiments from across the research analyst community.
“It’s very focused on synthesizing the most common pieces of information retail investors want to understand about a company,” Sikes says.
So while AI may one day be able to help investors make crucial decisions about their investment portfolios, right now it can be most helpful to help you understand concepts and get initial investing ideas. All of which need to be backed, either by the brokerage companies you are trusting to manage your money or via your own research.
Write to editors@barrons.com
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