There's a good chance you've run across some stories in the news about ChatGPT, a "chatbot" developed by the folks at OpenAI. It's newsworthy because it uses artificial intelligence (AI) and is designed to interact with people in a conversational style.
I thought I'd check it out, asking it questions about investing, to see how good it is. The experience was eye-opening and surprising. See if you agree.
Image source: Getty Images.
Questions and answers
Here are some of the questions I asked the chatbot, along with its answers and some commentary.
What are the best personality traits to have for stock investing?
The best personality traits for stock investing include patience, discipline, and an aptitude for research. Additionally, it is important to be comfortable with taking calculated risks, have the ability to think critically and objectively, and have the capacity to remain objective and unemotional during times of volatility.
This is actually a pretty good answer! I would add more, though, explaining that if all that is daunting, one can simply invest regularly in low-fee index funds for many years, building wealth effectively that way. I wouldn't want anyone to assume it's too much work to get rich via stocks.
Are growth stocks or value stocks better?
The answer to this question depends on your individual financial goals and risk tolerance. Growth stocks are typically characterized by higher levels of risk, but also the potential for higher returns. Value stocks, on the other hand, tend to have less risk but also may offer lower returns. It's important to do your research and speak to a financial advisor to determine which type of stocks are best for you.
This answer is also pretty much true -- though it doesn't point out that there can be stocks that have characteristics of both growth and value stocks. In other words, they can be growing fairly briskly and also be undervalued at times. Amazon.com, for example, and Meta Platforms are both considered to be undervalued by many.
The recommendation to speak to a financial advisor will serve many people well, but it's probably not necessary for everyone, as some people have learned enough to advise themselves.
What are the characteristics of a great company?
A great company typically has strong financial fundamentals, a competitive market position, and a long-term growth strategy. Additionally, a great company should have a strong management team, clear financial goals, and a culture of innovation and customer service.
This is a pretty good answer, too, though it fails to mention that it's best for a company to have one or more sustainable competitive advantages, such as a powerful brand, proprietary technology, economies of scale, etc.
Also, different kinds of companies will appeal to different investors. For some people, a great company will be continually innovating, while aiming to grow fast. It may, therefore, not pay any dividends. Other investors may prefer great companies that are more established slower growers, with more predictable earnings and dividend payments.
What's your best investing advice for 2023?
My best investing advice for 2023 is to create a diversified portfolio of low-cost index funds or exchange-traded funds (ETFs). Additionally, it is important to do your research, monitor your investments, and speak to a financial advisor to ensure that your investments are appropriate for your individual goals and risk tolerance.
This is very general, and not best for everyone. Some people who have been in index funds for a while and have been learning more about investing may want to start adding individual stocks to their mix in 2023. And exchange-traded funds are not mutually exclusive with index funds -- many ETFs are index funds. Those who are approaching retirement in 2023 should be taking different steps, too, such as adjusting their asset allocation, and perhaps reducing their exposure to stocks.
What is the funniest question you've been asked?
The funniest question I have ever been asked was, "Can I get rich overnight?" While the answer is obviously no, it was still a humorous reminder that investing requires patience and discipline.
I threw the chatbot a curveball here. That doesn't seem like such a hilarious question, though, nor a "humorous reminder," at least to me.
Overall, I asked the chatbot many other questions, and it's worth noting that the chatbot didn't always offer great answers. When I asked it who I was, it said that I was the author of a certain book. I have written books, but not that one. When I said so, it corrected itself and said I'd written a different book. That was also wrong.
Should you employ a chatbot as your new investment advisor?
Given that ChatGPT does offer some sound advice, should you trust it to guide how you deploy your hard-earned dollars? Not at all. Go ahead and have fun with it, seeing how it answers your queries, but remember that its answers are generally... general, and often a bit incomplete. And sometimes wrong. After all, it's still learning.
