ChatGPT beats top investment funds in stock-picking experiment | BusinessToday
ChatGPT has quickly become one of the most visited and popular websites in the world. This revolutionary tech has helped countless individuals complete their homework, draft reports, create travel plans, and so much more.
So naturally, as the capabilities of artificial intelligence have increased, many investors have been left wondering if they can use this generative AI model to help them make their investment decisions.
And while we certainly wouldn’t recommend relying solely on ChatGPT (or any other AI, for that matter) to make all your investing decisions for you, there are some benefits and opportunities that investors can capitalize on.
Today, we will be looking at whether you can actually use ChatGPT to build a stock portfolio, what some of the risks are with using AI to help invest your capital, and some stock picks from ChatGPT itself.
Can ChatGPT Pick Stocks for Your Portfolio?
Traditionally, investors have relied on a combination of fundamental analysis, technical indicators, and expert opinions to make their most important investment decisions. However, with the emergence of artificial intelligence and natural language processing, a new contender has entered the arena – ChatGPT.
ChatGPT brings a fresh perspective to the stock-picking process, leveraging its vast knowledge base and intricate pattern recognition skills to effectively create unique answers to people’s questions.
But can it truly outperform or augment the strategies employed by seasoned financial analysts? Can an AI language model actually replace the human touch that comes with traditional investment advice?
While ChatGPT might not possess the instincts and intuition inherent in human decision-making, its value lies in its ability to rapidly process and analyze enormous volumes of information. By scanning news articles, financial reports, historical data, and global events, ChatGPT can potentially identify investment opportunities that might have been overlooked or underestimated by the human eye.
It can assist investors in identifying emerging trends, market sentiment, and correlations between various economic factors – all of which contribute to a more well-rounded assessment when identifying potential investments.
That said, it’s essential to approach ChatGPT’s insights with caution. The model’s recommendations should be viewed as valuable input rather than definitive directives.
After all, stock market performance is influenced by a multitude of factors, including geopolitical events, economic shifts, and unexpected market sentiment swings – variables that can sometimes elude even the most advanced algorithms.
So, long story short, yes, ChatGPT can provide stock recommendations based on its analysis of data and patterns. However, these recommendations should be considered insights or ideas and not guaranteed predictions of future performance.
One Final Note:
Before getting to the exciting part of using ChatGPT for investing, we wanted to emphasize one critical piece of information: ChatGPT doesn’t yet have real-time data being filtered into its algorithms, meaning it won’t have the most up-to-date information about a company’s financial performance or other important factors. More specifically, ChatGPT only has access to data up to 2021, so the last few years of financial news, data, and information won’t be used to influence the AI model’s answers.
The AI-Generated Investment Portfolio
BLOG: How to capitalise on the Artificial Intelligence theme | Your Money
So, the moment you’ve all been waiting for, below is some AI-generated investing advice.
We’ve broken it down to be a tech-oriented portfolio of 10 different companies, with an even balance between large-cap and small-cap firms.
To provide some extra context, we did not ask ChatGPT to simply give us some stocks to invest in; rather, we asked the AI model which trends will likely last into the next decade.
From there, we did our own research to find 10 companies that fit the analysis and overarching trends that ChatGPT emphasized.
Before moving to the portfolio, remember this isn’t the equivalent of getting professional advice from a financial advisor, and investors should still do their own research before choosing to invest.
Large Cap Companies:
Apple Inc. (AAPL): Renowned for its iconic products, Apple’s extensive market presence, strong brand, and diverse product portfolio contribute to its status as a cornerstone of the tech industry. Its stable growth and consistent performance position it as an enduring tech company worthy of any investor’s portfolio.
Amazon Inc. (AMZN): A dominator in the e-commerce realm, Amazon’s wide-ranging services and potential for further expansion reinforce its position as a large-cap firm with multiple avenues for further growth. Its ability to innovate across various sectors has given it an enviable competitive advantage over other companies.
Microsoft Corporation (MSFT): A leader in software, cloud computing, and enterprise solutions, Microsoft is an AI juggernaut with a wide customer base. Its steady revenue streams and strategic acquisitions in recent years have contributed to its role as a tech giant.
Alphabet Inc. (GOOGL): Google’s stronghold in search, digital advertising, and technological innovation is what makes this one of the most cutting-edge tech firms in history. Its global reach and ongoing expansion into new markets underline why Alphabet (Google) is a great addition to a tech investor’s portfolio.
NVIDIA Corporation (NVDA): Noted for its influence in gaming, AI, and data centers, NVIDIA’s substantial impact in developing new tech justifies its high valuation and climbing share price. Its chips are relied on by many of the companies on this list to power their technology and give them the ability to innovate within their respective industries.
Small Cap Companies:
DocuSign Inc. (DOCU): With a focus on electronic signature and document management solutions, DocuSign is a well-positioned small-cap company with great growth potential. Its role in the realm of digital transformation and paperless processes offers room for considerable growth.
Etsy Inc. (ETSY): Etsy’s e-commerce platform is the Amazon for unique and handmade items. Its niche market and growing user base contribute to a unique position in the e-commerce sector, as well as a clear path for future success.
Twilio Inc. (TWLO): Twilio offers a cloud communications platform for companies across any industry. Its facilitation of businesses integrating communication capabilities into applications should provide a lasting runway for increasing demand as more and more companies look to improve their communication software.
CrowdStrike Holdings Inc. (CRWD): A small-cap company with cybersecurity solutions, CrowdStrike is primed for growth as cybersecurity takes center stage. The company’s cloud-based platform offers a unique and easy-to-implement solution for companies to better protect their digital data, documents, and processes.
Roku, Inc. (ROKU): With a foothold in media and entertainment through its streaming platform and devices, Roku is quickly becoming an ad-tech winner. Its contribution to the transition toward digital streaming shows it has barely scratched the surface of its true potential.
Looking at the portfolio ChatGPT has influenced, there is definitely potential for outsized returns. The AI model has done a good job of blending technology stalwarts with companies that still have the majority of their growth in the future.
That being said, whether or not this portfolio will outperform the index over an extended period remains to be seen.
The above is proof that investors can definitely use ChatGPT to help identify potential investment opportunities, though keep in mind that investing with an AI model will come with higher risk and uncertainty.
As always, it’s crucial to conduct thorough research and consider your individual risk tolerance before making any decision.
Some Advice on Risk
Using AI to help with investment research is exciting. However, investors must also understand the potential risks involved with using a methodology that is largely untested.
ChatGPT, although an incredible piece of technology, still has quite a bit of improvement left. The AI model is working with limited data and won’t be able to take into account someone’s personal investment goals and investment objectives (yet).
Rather, it will pick stocks based on the most up-to-date information it has available and will be limited in the ability to perform in-depth technical or fundamental analysis.
Knowing this, we want to highlight some key pieces of advice that investors should keep in mind when considering using ChatGPT in their investment process.
1. Knowledge Is Your Best Defense:
The more you understand the companies you’re investing in and the broader market trends, the better equipped you’ll be to make confident decisions.
Conduct thorough research, dig deep into financial statements, and stay updated on relevant news and developments.
2. Diversification Matters:
Spreading your investments across a range of companies, industries, and asset types can help mitigate risk. Diversification doesn’t eliminate risk entirely, but it reduces the impact of a single investment’s poor performance on your overall portfolio. Ensuring you have a properly diversified portfolio is one of the simplest and most effective forms of managing investment risk.
3. Define Your Risk Tolerance:
Assess your personal risk tolerance before making any investment decisions. Consider factors such as your financial goals, time horizon, and comfort level with market fluctuations. Align your investments with your risk tolerance to avoid making impulsive choices during market volatility.
4. Understand Different Types of Risk:
Risk comes in various forms – market risk, industry risk, company-specific risk, and more. Educate yourself about these types of risk and how they can affect your investments.
5. Keep Emotions in Check:
Emotional decision-making can lead to poor investment choices. Fear and greed can drive impulsive actions that might not align with your long-term goals. Stick to your investment strategy and avoid making snap decisions based on market fluctuations.
6. Have a Long-Term Perspective:
Investing is not a get-rich-quick scheme. Markets experience ups and downs over time, but historically, they have shown an upward trajectory. Stay focused on your long-term goals and avoid reacting to short-term market volatility.
7. Stay Liquid and Prepared:
Ensure you have an emergency fund and avoid over-committing your funds to investments. Being financially prepared for unexpected events can help you capitalize on market opportunities.
8. Monitor and Adjust:
Regularly review your portfolio’s performance and make adjustments as needed. As market conditions change, your investments might need rebalancing to maintain your desired risk profile.
9. Seek Professional Guidance:
If you’re uncertain about your investment strategy or risk management, consider seeking out a qualified professional who can provide financial advice. Their expertise will provide valuable insights tailored to your individual circumstances.
Final Word
Throughout this article, we’ve explored the concept of using ChatGPT to assist you in building a tech-focused stock portfolio. Between 5 large-cap firms and 5 small-cap disruptors, ChatGPT can definitely help you identify stocks to consider adding to your portfolio.
That being said, we’ve made sure not to ask ChatGPT which stocks to invest in directly, as the AI model isn’t yet capable of using real-time information to create responses. Instead, we’ve made more strategic use of the AI by asking it for existing, growing, and investable trends that we can then do our own research on for which stocks to actually buy.
So, while ChatGPT can definitely provide valuable insights and data-driven recommendations, this AI model isn’t yet ready to entirely replace the judgment, expertise, and human intuition that go into making sound investment decisions.
The better strategy is, instead of hoping ChatGPT will do all the work for you, to think of this new piece of artificial intelligence as just one more tool in your toolbox that you can use to help conduct research, identify opportunities, and give a different perspective when building your portfolio.
Disclosure/Disclaimer:
We are not brokers, investment, or financial advisers; you should not rely on the information herein as investment advice. If you are seeking personalized investment advice, please contact a qualified and registered broker, investment adviser, or financial adviser. You should not make any investment decisions based on our communications. Our stock profiles are intended to highlight certain companies for YOUR further investigation; they are NOT recommendations. The securities issued by the companies we profile should be considered high risk and, if you do invest, you may lose your entire investment. Edge Investments and its owners currently hold shares in Braxia stock and are compensated by Braxia for Investor Relations Services. Edge Investments and its owners reserve the right to buy and sell shares in Braxia without further notice, which may impact the share price. Please do your own research before investing, including reading the companies’ public filings, press releases, and risk disclosures. The company provided information in this profile, extracted from public filings, company websites, and other publicly available sources. We believe the sources and information are accurate and reliable but we cannot guarantee it. The commentary and opinions in this article are our own, so please do your own research.
Copyright ©️ 2023 Edge Investments, All rights reserved.