174. Can ChatGPT Actually Help You To Invest?

The Stocks and Savings Podcast

The episode explores the utility and risks of using AI tools like ChatGPT for personal finance and investment research. The hosts demonstrat

Key takeaways

• Research from the Financial Conduct Authority shows 4 in 5 less experienced UK investors have used AI for investment help.
• AI can be highly effective at summarizing earnings reports for smaller portfolio holdings like Shopify or CrowdStrike to save time.

Main topics

• AI in investment research
• Earnings report summarization

Notable quotes

AI is an additional tool within the research process. But it is not the research process itself.

Conclusion

AI is a powerful productivity tool for gathering and organizing financ

Transcript preview

Speaker 1 (0:00) A few years ago, if you wanted help understanding your investments, you might have spent an entire evening searching the internet for helpful articles, digging through company reports, or just trying to figure out the differences between a pension and ISA and which one you should use. But today you can open ChatGPT, ask it a question, and get what sounds like a pretty convincing answer in seconds. And Speaker 2 (0:21) that is a huge leap for pretty much every type of investor. whether you own 30 individual stocks or you've got your entire portfolio in one global index fund. But is it actually a leap forward? Can ChatGPT really help us to make better financial decisions? Or does it make it dangerously easy to outsource decisions that we really should be making ourselves or discussing with a professional? The speed at which AI has transformed our everyday lives has been quite staggering. So I think it's only fair that we finally look at it as a tool for your investments and give our... thoughts. So today, we'll look at where we think AI is genuinely useful, where it can go wrong, and we'll actually put it to the test using one of the companies we know best, MercadoLibre, all on this episode of the Stocks Speaker 1 (1:08) and Speaker 2 (1:08) Savings Podcast. Speaker 1 (1:09) Hi, we're Andrea and Jamie, two millennial investors and qualified accountants that are here to help you become more confident about the world of investing and finance. We want to give a disclaimer that we are not financial advisors. Nothing in this podcast should be treated as financial advice. This is for educational purposes only. When investing, your capital is at risk and the value of your investments may rise and fall. Best performance does not guarantee future results. Speaker 2 (1:30) We'd like to thank our sponsor Trading212 for helping us to bring you this episode. Trading212 is an investing platform which aims to democratize investing and it's also the platform we trust with our stocks and shares ISAs, but more on them a little bit later on. Speaker 1 (1:42) Now, before we get into what ChatGPT can actually do, it's worth understanding how quickly this is becoming a part of the investing world for DIY investors. The Financial Conduct Authority recently published research looking at younger investors in the UK and found that among less experienced investors, four in five had already used AI for help with investing. And almost 40 % of those believed it was okay to make an investment decision based solely on an AI-generated answer. It's quite incredible to read these numbers when you consider that three years ago, nobody really knew what ChatGPT was. And now research like this shows that the majority of new investors are using it for investment support. People say AI is still in its early innings. And yet, it already feels like one of the most transformational pieces of technology in our lifetime. Speaker 2 (2:30) I guess the important takeaway is that people aren't just asking chat GPT to explain what PE ratio is, what market cap is. There's actually a decent amount of investors, and as that research show, particularly younger or newer investors, who are asking it exactly what they should be doing with their money. And I mean, the genie's out of the bottle now. We'd imagine the number of people using AI to help with their money and investments is only going to grow. So this isn't going to be a case of asking whether or not AI is simply good or bad for investors. I don't think it is objectively either. It's more about what you're actually asking it and what you can do with that information. And that distinction matters whether you're researching NVIDIA or simply trying to work out whether your global index fund belongs in an ISA or a pension. Speaker 1 (3:16) So let's start with how we think these tools can genuinely make investing easier for the everyday investor. And maybe it's a good time to talk about how we use AI ourselves. For us, AI is an additional tool within the research process. But it is not the research process itself. If we're doing a proper deep dive on a company, deciding whether or not we're going to put our own money into something, or researching a business that we bring to this podcast, we're still going through the company results, investor presentations, earnings call transcripts. and other pieces of information ourselves. We're not getting ChatGPT to write an investment thesis and simply make it our own. But Speaker 2 (3:58) there are plenty of smaller jobs where AI can save a lot of time. And one of the easiest examples is during earnings season. So for example, at the time of recording, I own shares in 27 individual stocks. Some of those are quite large positions that I follow very closely. So the likes of MercadoLibre, CrowdStrike, Axon, Shopify, and so on. But others are a much smaller part of my portfolio. So I'm thinking Uber, Zscaler, Kroda, Bloomsbury, and so on. And it doesn't make sense, I don't think, for me to allocate the same amount of my time to a company that makes up less than 2 % of my portfolio as it does to a company that makes up over 5%. And to be honest, that's 27 earnings reports every quarter. So over 100 earnings reports every single year, and that would take up a lot of time. And what used to happen is I would only really focus on the larger holdings and just read a very quick overview of the smaller ones, if that. But AI has changed that. It's now far easier for me to get a more detailed idea about how the smaller holdings have got on too. I just download their results, the earning call transcripts, and upload them to ChatGPT or Gemini with a detailed prompt that I just copy and paste. But to be honest, you could simply ask ChatGPT to give an overview of these results and highlight the key points for investors to know and whether or not there's any red or yellow flags. That can give you an immediate idea about what's happened, and that is very useful if you wouldn't otherwise have had time to look through the results. But... This is where, as an investor, you need to be very careful. If ChatGPT says it's been an amazing quarter, don't go rushing to buy shares. And similarly, if ChatGPT says the business is falling apart, don't go rushing to sell shares. These responses should not be a trigger to make a buy or sell decision. They should be a trigger that makes