Artificial intelligence (AI) isn’t new, but it is evolving. The latest ChatGPT, or Chat-generated pre-trained transformer, is the newest AI to hit the headlines. Its developers claim it has numerous applications in everyday life.
How ChatGPT Works
ChatGPT is a pre-trained generative chat that makes use of natural language processing (NLP). In other words, you ask it a question, and it answers in human-like speech instead of the old robotic way.ChatGPT’s data sources are textbooks, various articles, and websites. It uses these sources to model its language when responding to human interaction.
AI Already Used in Finance
AI isn’t new to the finance world. In 2008, robo-advisors became available to investors. This is a digital platform, and it provides automated, algorithm-driven financial planning and investment services. With robo-advisors, there is little to no human supervision.Most robo-advisors use modern portfolio theory to build passive, indexed portfolios for their users. And once the portfolios are built, the robo-advisor continually monitors them. They ensure that optimal asset class weighings are maintained.
ChatGPT’s Depth of Knowledge
It’s prudent to start with the premise that ChatGPT isn’t always accurate. Remember, it sources a lot of its information from the internet, and you don’t always find accurate information on the web.ChatGPT for Investment Research
If you are conducting investment research on ChatGPT, it won’t tell you the best stocks. It’s not capable of giving an opinion, but it can identify the most profitable companies on the stock index.Asking ChatGPT the Right Questions
The key to using ChatGPT is asking it the right questions. And just because you ask a question, doesn’t mean ChatGPT understands the nuance that comes with that question.So, if you want to ask it how you should diversify your portfolio, you’re going to receive a generic answer that probably doesn’t pertain to you. Instead, you must give a scenario of who you are and what you want to achieve. Or, if you follow an investment style, ask ChatGPT to create a portfolio that mimics the style of Ken Griffin or Warren Buffet’s Berkshire.
Are Financial Advisors Worried?
A financial advisor creates long-term plans for building wealth. They help to manage risk. They break down confusing jargon and explain it to you in everyday language.- wealth managers
- tax professionals
- financial planners
- investment professionals
ChatGPT can take the question you ask and come up with a plan. But that’s only half the story. It can’t ask probing questions about your finances. It doesn’t dig deep. A human will follow up with questions and help guide you to the answers needed. Because ChatGPT can’t go in-depth, it cannot help you set realistic goals.
ChatGPT Only as Good as Its Dataset
You can use the information available in ChatGPT for historical research, but your research will have to go back to 2021, and it’s information that is found on the internet or various other sources.If you’re using ChatGPT, it’s important to ask the right questions. Remember, it can’t follow up like a financial advisor can, so your answer won’t be in-depth.
ChatGPT can be used as a tool when developing your portfolio, but it’s probably wise to keep the human touch.