Here's What Happens When You Ask ChatGPT for Investing Advice

A whopping 54% of Americans use ChatGPT for personal finance recommendations, according to The Ascent research. But is ChatGPT more than a wallet wizard? Can it -- deep breath -- provide valuable, actionable investing advice? Maybe even replace an expensive investment advisor?

ChatGPT is one of the fastest-growing products ever, collecting over 100 million users two short months after launch. Thousands are bound to turn to it for investing advice. But is it useful? 

To answer this question, I settled in for a quick chat with my friendly neighborhood chatbot, ChatGPT (the paid version known as GPT-4). Here's what happened when I asked the $20-per-month bot for investing advice, sticking to questions you'd actually ask the AI.

ChatGPT: Where should I start with investing?

I asked ChatGPT, "Where should I start with investing?" and it responded. In a very thorough manner, it listed a nine-step plan to get started. Here are the first three steps it suggested:

1. Set clear financial goals.
2. Save an emergency fund.
3. Understand your risk tolerance.

It wrapped up its nine-step plan by urging me to consider seeking out a financial advisor.

ChatGPT's suggestions were clear and compelling. It urged me to educate myself before actually investing and stay focused on long-term goals, which is how we at The Ascent advise readers to build their retirement savings.

ChatGPT: What are some good investment strategies?

I asked ChatGPT, "What are some good investment strategies?" and it responded with another list. This one listed nine investing strategies. Here are the first three it suggested:

1. Buy-and-hold
2. Value investing
3. Growth investing

It wrapped up its nine suggestions with the caveat that I choose one or more strategies based on my individual circumstances. And it suggested I speak with a financial advisor.

Again, I found ChatGPT's suggestions clear and compelling. It suggested legitimate investing strategies that many financial experts advocate for. For example, The Ascent believes in buying high-conviction stocks and holding them for five years or longer.

ChatGPT is not a financial advisor

So, that was fascinating. ChatGPT actually offered me helpful, actionable investing advice. If I were a new investor, I might've learned a lot from ChatGPT's short, accurate summaries. As it was, the refresher simply helped me recall things I already knew to be true.

But for all its usefulness, the premium version of ChatGPT has two fatal flaws:

• Limited memory
• Zero accountability

Practically speaking, ChatGPT has the memory of a goldfish. Imagine talking to a financial advisor about your ideal investing strategy for 30 minutes, only for him to suddenly forget everything you said in the first 15 minutes. ChatGPT is like that (paid and unpaid).

Legally speaking, ChatGPT is a bandit. If an AI like ChatGPT gives you bad or incorrect advice, you can't make peace with the bot, talk to its manager, or take it to court. Compare that to a financial advisor, who may be accountable under U.S. law for making terrible suggestions.

TL;DR: ChatGPT is not a financial advisor. Its ability to tailor advice to your circumstances is limited. Nor can it be held accountable for providing you with false information, which users have proven it does in many cases (even ChatGPT's creators say it hallucinates).

Keep things general and brief

Despite all that, ChatGPT can provide helpful investing advice for cheap. Keep questions general and conversations brief. And just like you would when speaking to an internet stranger, verify advice with a Google search or by speaking to a financial advisor you can trust. 

Feel free to use ChatGPT (the paid version) as a supplement to Google and human experts. It's very good at explaining complicated things, making them easy to understand. Note that the free version is much more limited, and for that reason, I didn't explore it much. 

Don't want to hire a financial advisor? You're not alone. Only 31% of Americans work with one, according to Northwestern Mutual. Some stock brokers offer an alternative: robo-advisors. They're affordable and similar to traditional advisors -- worth checking out.