Since its release, OpenAI's ChatGPT has taken the internet by storm, becoming the fastest-growing consumer application ever, according to UBS. It was launched on Nov. 30, 2022, and it had 100 million monthly active users by January.
With the countless amazing things ChatGPT can do, it's no surprise people are becoming increasingly interested in how it can help them invest. There's no doubt ChatGPT is a great resource, but it has some limitations. The one mistake you don't want to make is thinking it can replace all of your research.
Outdated information could lead you astray
The problem isn't that ChatGPT can't provide information about market conditions, companies' finances, industry trends, the political climate, or any other factors someone would consider before making an investment. The issue is that it can't provide accurate, real-time data or information about these things.
Having insights into industry trends or a company's financials doesn't help if the information is outdated. In some cases, it may do more harm than good.
Market conditions change frequently, companies report financials quarterly, trends are generally cyclical, and one piece of news could affect geopolitics seemingly overnight. All of this can (and does, in most cases) happen much faster than ChatGPT updates its training data.
Let's use AT&T (T 1.58%) as an example. I asked ChatGPT-4 to "give me a rundown of AT&T's different businesses," and one thing it brought up was WarnerMedia, replying, "AT&T expanded into the media business with its acquisition of Time Warner in 2018, which was subsequently renamed WarnerMedia."
The problem is that AT&T spun off its WarnerMedia business in April 2022 in a $43 billion deal.
NYSE: T
Key Data Points
If you were interested in investing in AT&T and thought the company venturing into different industries was a good sign, ChatGPT's response could lead you to invest. Or if you thought the company should focus on its core telecom business, its response could keep you from investing. Either way, both decisions would likely be different with the correct information.
How investors can use ChatGPT for good
Although there are limitations in respect to accessing accurate, real-time data, all isn't lost when it comes to using ChatGPT for investing purposes. It's a great tool for explaining investing concepts, breaking down different investing strategies, and even developing investment ideas.
Confused about what a specific investing term or topic is? ChatGPT can explain something as simple as the difference between stocks and bonds or clarify more complex topics such as financial derivatives.
Need help deciding what investing style may best suit you? Tell ChatGPT your risk tolerance, goals, and other relevant information, and it could help you decide whether value investing, income investing, or growth investing is right for you. You could even go as far as having it create a mock portfolio based on a given investing style (though that doesn't mean you should copy it in real life).
However you decide to use ChatGPT for learning, a good tip is to be specific about how you want to be taught. For example, you could ask it to define dollar-cost averaging in a way that a middle schooler could understand, explain dividends to someone who's never invested before, or break down a financial statement using everyday terms. The options are virtually endless.
Use ChatGPT as one resource
ChatGPT can explain complex topics simply and do things in a fraction of the time it takes humans to do them, but don't lose sight of the fact it's an AI model. Humans can contextualize information and use personal experiences and intuition in ways an AI model can't -- and never will.
You can learn a lot from ChatGPT, but it's best to use it as a resource, not a crutch. Combine its capabilities with your personal insight and real-time data.
