ChatGPT can pick stocks better than your fund manager
MIAMI -- A basket of stocks selected by ChatGPT, a chatbot powered by artificial intelligence (AI), has far outperformed some of the most popular investment funds in the United Kingdom.
Between March 6 and April 28, a dummy portfolio of 38 stocks gained 4.9% while 10 leading investment funds clocked an average loss of 0.8%, according to an experiment conducted by financial comparison site finder.com.
It wouldn't "be long until large numbers of consumers try to use [ChatGPT] for financial gain," Jon Ostler, Finder's CEO, said in a statement earlier this week.
Over the same eight-week period, the S&P 500 index, which tracks the 500 most valuable companies in the United States, rose 3%. Europe's equivalent, the Stoxx Europe 600 index, ticked up 0.5% in that time.
A typical investment fund pulls together money from multiple investors, and is overseen by a fund manager who decides how to invest that money.
Finder's analysts took the 10 most popular UK funds on trading platform Interactive Investor as a benchmark for assessing the performance of the ChatGPT-generated fund. Funds managed by HSBC and Fidelity were among those selected.
The analysts asked ChatGPT to select stocks based on some commonly used criteria, including picking companies with a low level of debt and a track record of growth. Microsoft, Netflix and Walmart were among the companies selected.
While major funds have used AI for years to support their investment decisions, ChatGPT has put the technology in the hands of the general public, with the potential to guide the decisions of retail investors.
A survey of 2,000 UK adults conducted by Finder last week showed that 8% had already used ChatGPT for financial advice, while 19% said they would consider doing so.
Yet a much bigger 35% said they would not consider using the chatbot to help them make decisions about their money.
Still, "fund managers may be starting to look nervously over their shoulders," Ostler said.
Disrupting finance
In a study published in April, researchers at the University of Florida found that ChatGPT could predict the stock price movements of specific companies more accurately than some more basic analysis models.
Since research company Open AI opened up access to ChatGPT in December, the chatbot has stunned users with its ability to provide lengthy, sophisticated responses to questions.
Its potential uses — from writing high school essays to dispensing medical guidance — have raised concerns that the technology could provide misleading information, allow students to cheat on exams, and oust real people from their jobs.
Ostler at Finder said the "safe and recommended" approach for individual investors was to conduct their own research or speak to a qualified financial adviser. He cautioned that it was too early for investors to trust AI with their finances.
Nevertheless, "the democratization of AI seems to be something that will disrupt and revolutionize financial industries," Ostler said.