Investors are turning to ChatGPT for stock selection and portfolio management. While the robo-advisory sector experiences an AI boom, experts warn about the high risk involved.
Artificial intelligence has started playing an increasing role in the world of investment. Less than three years after the launch of ChatGPT, at least one in ten retail investors is now using chatbots to decide which stock to buy. This interest is fueling a significant growth wave in the robo-advisory sector, which offers automated and algorithmic financial advice.
Investment Decisions Are Left to AI
Individual investors can now access analysis and market data previously available only to large banks or institutional investors. Robo-advisory refers to digital platforms that provide automated financial advice using algorithms and artificial intelligence. Research suggests that the revenue of the robo-advisory sector is expected to reach approximately $470 billion by 2029—nearly six times last year’s figure.
Surveys indicate that investor interest in AI is rapidly growing. According to eToro’s global survey of 11,000 investors, nearly half of investors are considering using AI tools, and 13% are already using them. In the UK, a Finder survey found that 40% of participants have tried chatbots like ChatGPT and Gemini for financial advice.
However, experts remain cautious. They point out that generative AI models can misstate figures, over-rely on past price movements, or err in predicting the future.
There Are Also Successful Examples
In March 2023, Finder asked ChatGPT to create a stock portfolio based on specific criteria. These criteria included companies with low debt levels, sustainable growth, and a competitive advantage. The 38 stocks selected by ChatGPT included major companies like Nvidia, Amazon, Procter & Gamble, and Walmart. This portfolio is reported to have increased by 55% so far.
This performance is 19 points higher than the average of the UK’s top 10 most popular funds, including those managed by Vanguard, Fidelity, HSBC, and Fundsmith.
Nevertheless, experts emphasize that investing with AI carries high risk and requires financial knowledge. Experts suggest that even if using ChatGPT or similar tools, it is better to add further details to queries, such as, “Act as a short-position analyst,” or “Base the analysis solely on SEC documents.”
What strategies do you think are necessary to safely use AI for investment decisions?
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