As artificial intelligence (AI) continues to grow in popularity, it's no surprise that more people are turning to ChatGPT for investing advice. In fact, 47% of Americans say they've used ChatGPT for stock tips, according to a 2023 survey by The Motley Fool, and 69% say they'd consider using it for investing purposes in the future.
Considering ChatGPT was only launched in November 2022, it's safe to assume that these numbers will likely grow as more people become familiar with the technology. But while AI can be helpful in some cases, there's still reason to be cautious when it comes to investing.
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AI still has its limits
Using AI to help with choosing stocks can have its advantages. ChatGPT is more accessible to the average investor than a professional financial advisor and can provide a helpful starting point.
AI can also make it easier to analyze technical information like financial statements and earnings calls. For those who are nervous about jumping into the world of investing, ChatGPT can be a tempting option.
But there are risks to consider, too. For one, by its own admission, ChatGPT doesn't have a full understanding of events that have occurred since September 2021. That can make it incredibly difficult for AI to analyze a company's performance and stock history, resulting in potentially inaccurate or even harmful advice.
Your goals will affect your strategy
One of the biggest downsides to using AI for investing, though, is that it's not personalized. Your investing goals will help determine where and how much you should invest, and if the advice you're receiving doesn't reflect those goals, it may not be accurate for your situation.
For example, if you're investing to save for a down payment on a house, you may have a shorter timeline than someone saving for retirement. Your timeline helps determine how much risk you can comfortably take, and some investments are better suited for different goals.
If you're planning on giving your investments several decades to grow, for instance, you may be able to take on more risk right now. If there's a recession or the market crashes, you'll have plenty of time for your portfolio to recover. But if you expect to need your money in the next five to 10 years, you may want to play it safer.
AI also doesn't have a sense of your personal risk tolerance. Some investors can handle the stomach-turning ups and downs of the stock market better than others, and where you choose to invest will depend on how much short-term volatility you can tolerate.
Is ChatGPT a smart way to get investment advice?
AI projects like ChatGPT have loads of potential in the investing world -- particularly when it comes to analyzing complex documents and statements. However, the technology isn't without risks, and its one-size-fits-all approach could be harmful in some cases. Also, because the information ChatGPT is working with may not be up to date, it's wise to double-check that the data is correct before taking the technology at its word.
Regardless of how you get your information, it's always important to ensure you're taking your goals and risk tolerance into account before you buy. Every investor's strategy will be slightly different, and the more tailored your approach, the safer your money will be.
