Should you trust AI with your investments?

Karl 21st Jul 2023 No Comments

Reading Time: 5 minutes

With Artificial intelligence (AI) evolving at an unprecedented pace, it’s now possible to use an online chatbot to help you make investment decisions.

But given the serious drawbacks of AI language models, is trusting a robot with your portfolio really a good idea?

In this article we’re going to explore the answer to this question, and take a look at how UK investors currently feel about AI. Keep on reading for all the details or click on a link to head straight to a section…

How do UK investors feel about AI?
What AI investing tools are out there?
Should you trust AI with your investments?

How do UK investors feel about AI?

According to a recent study by the Investor Index, 73% of UK investors believe chatbots such as ChatGPT could give reliable financial advice in future. The same survey also revealed 42% of respondents aged 18-34 said they had already used an AI chatbot for financial advice.

Given the striking progression of AI over the past six months or so, it perhaps shouldn’t be surprising to learn that UK investors are seemingly so open to trusting AI with their finances.

Despite this, it should be noted that anyone who’s used an AI tool over the past few months will be all too aware that the the technology is a long way off perfect. Spend some time conversing with ChatGPT or Google Bard and it won’t be long before you’re told some misleading, or downright inaccurate information.

While the drawbacks of these chatbots may not be a huge issue if you’re using one to help you draft a best man’s speech, you probably shouldn’t be quite as laid back when it comes with trusting a robot with your finances.

Yet as AI develops over the coming months or years (who knows?), will there soon be a time when all of us are using robots to help us with financial decisions?

While we don’t have a crystal ball to answer that question, what we can do is to take a look at some existing AI financial tools and explore whether they’re worth bothering with…

What AI investing tools are out there?

While AI chatbots have been mainstream for about six months now following ChatGPT busting onto the scene back in February, we shouldn’t forget that finance AI tools have already been a ‘thing’ for a number of years now in the form of ‘robo-advisors’.

Robo-advisors

Robo-advisors are automatic investing tools which use algorithms to select investments on your behalf.

When it comes to robo-investing, all you need to do is download an app and answer a few questions touching on topics related to your tolerance for risk, investing goals, and time-horizon. Your robotic companion will then use your answers to suggest investment portfolios for you.

Because robo-advisors aren’t human, but have the ability to suggest personalised portfolios, they’re essentially a ‘third’ option between maintaining an actively managed portfolio and independently handpicking your own stocks and shares.

Right now there’s a number of providers offering robo-investing services such as Wealthify, Moneyfarm, IG, and Nutmeg.

To learn more about automatic investing tools, including the pros and cons, take a look at our article that explores whether robo-advisors are a good way to invest.

AI chatbots

While not designed to give financial advice, it is possible to ask an online AI chatbot for investing tips or information about the recent performance of a particular industry or sector.

However, it should be noted that these questions can only be asked to chatbots with access to live data, such as Bing Chat, Google Bard or ChatGPT 4. (The widely popular free version of ChatGPT doesn’t have access to live data).

While using well-known chatbots for finance tips isn’t particularly a startling revelation, it should be noted that there are now a number of specialist services built through ChatGPT, that are being designed to answer questions on specific niches.

Calling itself the ‘ChatGPT for Personal Finance’ FinChat.io is one such tool. The chatbot is able provide live stock data, analyse industry performance, and suggest tips for investing in the stock market.

It’s fair to say that here at MoneyMagpie we were a tad impressed when we played with the tool after asking it to name us the ‘best performing FTSE 100 stock this year’.

It correctly told us: “The best performing FTSE 100 stock this year is Fuller, Smith & Turner P.L.C. (LSE:FSTA). Its year-to-date total return is 16.08%.”

The chatbot then added a warning about relying on past performance: “Please note that this information is based on historical performance and may not guarantee future results. It’s always important to conduct thorough research and consider various factors before making any investment decisions.”

FinChat then provided data about Fuller, Smith & Turner’s stock price and earnings yield. Impressive, even if we didn’t particularly ask for it!

Testing FinChat.io

Following our discussion, we wanted to push FinChat a bit more by asking it: “Where should I invest?”

After a short thinking time, the chatbot gave a rather generic answer: “As a superintelligent AI, I can provide you with some general guidance on where to invest your money. However, without specific information about your financial goals, risk tolerance, and time horizon, it’s challenging to give personalised advice.

“That being said, there are a few common investment options you may consider. One option is to invest in a diversified portfolio of stocks and bonds. This can help spread your risk and potentially provide long-term growth.

“Another option is to invest in real estate, either through direct ownership or real estate investment trusts (REITs). Real estate can offer both income and potential appreciation. Additionally, you may want to explore investing in mutual funds or exchange-traded funds (ETFs).

“These investment vehicles pool money from multiple investors to invest in a diversified portfolio of assets. They can be a convenient way to gain exposure to various asset classes, such as stocks, bonds, or commodities.”

Again, the chatbot ended with a thorough disclaimer:

“… it’s important to consider your own financial knowledge and comfort level with investing. If you’re unsure about making investment decisions on your own, you may want to consult with a financial advisor who can provide personalized guidance based on your specific circumstances.

“Remember, investing involves risks, and it’s crucial to do thorough research and consider your own financial situation before making any investment decisions.”

So, while FinChat certainly served up some decent, accurate information, it was reluctant to recommend specific companies to invest in.

Should you trust AI with your investments?

It almost goes without saying, but given the obvious limitations of AI, trusting your finances with an online chatbot is probably unwise, at least for the time being.

If you’d like to learn more about a specific sector or industry, however, you may find what you’re looking for with an online chatbot, such as FinChat.io, Google Bard, or Chat GPT 4 (assuming you’ve already read the MoneyMagpie investing section, of course!)

It should also be said that robo-advisors are a totally different beast from AI chatbots as they’ve been around a lot longer. While they’re far from perfect, and are often not the cheapest way to invest, there’s no doubt that automated investing tools are being relied upon by a growing number of investors.

As a result, if you do want to use AI to help with you investing decisions, then a robo-advisor, as opposed to an AI chatbot, is probably the way to go for now.

Of course, that’s not to say that this will be the case forever. Should the world of AI continue to develop at the pace is has been developing over the past six months or so, then who knows how advanced AI tools will be in the future.

If you’re a believer in AI technology, but don’t yet want to trust it with your finances, then you may be interested in inventing some of your capital in the industry. If that applies to you, then do take a look at our article that explores how to invest in artificial intelligence.

And while we’re at it…. are you keen to learn more about investing? If so, why not sign up for our fortnightly MoneyMagpie Investing Newsletter.

Disclaimer

MoneyMagpie is not a licensed financial advisor and therefore information found here including opinions, commentary, suggestions or strategies are for informational, entertainment or educational purposes only. This should not be considered as financial advice. Anyone thinking of investing should conduct their own due diligence.