The success of ChatGPT, an AI-powered chatbot, in selecting a basket of stocks that outperformed some of the most popular investment funds in the UK is a significant development in the field of financial investment.
During the period of March 6 to April 28, 2023, a notional portfolio consisting of 38 stocks that were handpicked by ChatGPT showed a gain of 4.9%.
In contrast, 10 of the most popular investment funds in the UK incurred an average loss of 0.8% over the same period. This experiment was conducted by financial comparison site finder.com and was reported by CNN.
This development is particularly noteworthy as investment funds are typically overseen by fund managers who decide how to invest the pooled funds from multiple investors.
The poor performance of these funds, coupled with the impressive gains of ChatGPT’s stock selection, suggests that AI technology has the potential to transform the investment landscape.
The CEO of Finder.com, Jon Ostler, believes that it is only a matter of time before many consumers turn to ChatGPT for financial gains. This is an indication that the benefits of AI technology in investment are becoming more recognized and that it has the potential to play an increasingly significant role in the financial industry.
It is interesting to note that, over the same eight-week period, the S&P 500 index rose 3%, while Europe’s Stoxx Europe 600 index increased by only 0.5%. This further emphasizes the impressive nature of ChatGPT’s stock selection, as it outperformed both of these major indices.
Finder.com’s analysts used the top 10 investment funds in the UK from Interactive Investor, including those managed by HSBC and Fidelity, as a benchmark to evaluate the performance of the ChatGPT-generated fund.
The analysts instructed ChatGPT to choose stocks based on commonly used criteria, such as selecting companies with low debt and a history of growth. ChatGPT selected companies such as Microsoft, Netflix, and Walmart.
Chatbot ChatGPT Outperforms UK Fund Managers
While major funds have utilized AI for years to support their investment decisions, ChatGPT has made this technology accessible to the general public, potentially guiding retail investors’ decisions, as reported by CNN.
According to a survey conducted by Finder.com, 8% of UK adults have already utilized ChatGPT for financial advice, while 19% would consider doing so. However, a larger percentage of 35% said that they would not consider using the chatbot to assist them in making financial decisions, as reported by CNN.
In April, researchers from the University of Florida conducted a study that found that ChatGPT could more accurately predict the stock price movements of specific companies than some of the more basic analysis models. This highlights the potential of AI-powered investment strategies to outperform traditional investment approaches.
The success of ChatGPT in selecting a basket of stocks that outperformed some of the most popular investment funds in the UK, coupled with its ability to provide accessible financial advice to retail investors, has the potential to significantly impact the financial industry.
Firstly, it highlights the potential of AI technology to transform investment strategies, potentially leading to a shift away from traditional investment approaches.
As the technology continues to advance, it is likely that more investors, both retail and institutional, will turn to AI-powered investment strategies to achieve higher returns on their investments.
Secondly, ChatGPT’s success has the potential to democratize financial advice and investment decision-making, making it more accessible to a broader range of individuals. This could lead to increased financial literacy among the general public, as more people become empowered to make informed decisions about their finances.
Finally, the success of ChatGPT could potentially lead to increased competition in the financial industry. As more AI-powered investment platforms emerge, traditional investment firms may need to adapt and incorporate this technology into their investment strategies to remain competitive. This could ultimately lead to increased innovation and a more dynamic financial industry.