Can technologies like ChatGPT help in better investing?

[vc_row type=”in_container” full_screen_row_position=”middle” column_margin=”default” column_direction=”default” column_direction_tablet=”default” column_direction_phone=”default” scene_position=”center” text_color=”dark” text_align=”left” row_border_radius=”none” row_border_radius_applies=”bg” overflow=”visible” overlay_strength=”0.3″ gradient_direction=”left_to_right” shape_divider_position=”bottom” bg_image_animation=”none”][vc_column column_padding=”no-extra-padding” column_padding_tablet=”inherit” column_padding_phone=”inherit” column_padding_position=”all” column_element_spacing=”default” background_color_opacity=”1″ background_hover_color_opacity=”1″ column_shadow=”none” column_border_radius=”none” column_link_target=”_self” column_position=”default” gradient_direction=”left_to_right” overlay_strength=”0.3″ width=”1/1″ tablet_width_inherit=”default” tablet_text_alignment=”default” phone_text_alignment=”default” animation_type=”default” bg_image_animation=”none” border_type=”simple” column_border_width=”none” column_border_style=”solid”][vc_column_text css=”.vc_custom_1686052309386{margin-right: 16px !important;margin-left: 16px !important;border-right-width: 10px !important;border-left-width: 10px !important;}”]The launch of ChatGPT has triggered a big public debate regarding its usage in everyday activities and its long-term impact on various industries. A question has arisen as to whether it will make current job profiles redundant or not.

While we have been hearing about and using AI in our daily lives for several years now, Alphabet’s LaMDA and OpenAI’s ChatGPT are signs that technological development has reached a significant inflection point.

ChatGPT by OpenAI is already being hailed as a game-changing tool in the field of education and content creation only a few months after its public release. According to some reports, the AI-powered chatbot managed to clear the US Medical Licensing Examination (USMLE) and an MBA examination designed by a professor from Wharton, University of Pennsylvania.

ChatGPT is also making strides in the financial domain

Even though it is still in a nascent stage, some experiments using ChatGPT offer evidence that it can be used as a tool to make more informed investment decisions.

A basket of stocks selected by ChatGPT, a chatbot powered by artificial intelligence (AI), has outperformed some of the most popular investment funds in the United Kingdom. Between March 6th and April 28th, a dummy portfolio of 38 stocks gained 4.9%, while 10 leading investment funds clocked an average loss of 0.8%, according to an experiment conducted by the financial comparison site finder.com.

A typical investment fund pulls together money from multiple investors and is overseen by a fund manager who decides how to invest that money.

Finder’s analysts took the 10 most popular UK funds on the trading platform Interactive Investor as a benchmark for assessing the performance of the ChatGPT-generated fund. Funds managed by HSBC and Fidelity were among those selected.

Democratising information available to only select few earlier

While major funds have used artificial intelligence for years to support their investment decisions, ChatGPT has put the technology in the hands of the public, with the potential to guide the decisions of retail investors.

In a study published in April, researchers at the University of Florida found that ChatGPT could predict the stock price movements of specific companies more accurately than some more basic analysis models.

The use of ChatGPT allows investors to quickly assess potential investments by asking questions through a chatbot interface. The technology enables investors to gather information about companies efficiently, enabling them to make better investment decisions. It helps them reduce time spent on tasks that do not add value for them or their clients.

ChatGPT determines if a headline is good, bad, or irrelevant for a firm’s stock prices and computes a score. This research found a high correlation between ChatGPT’s responses and stock market movements, showing some ability to predict the direction of returns.

A precursor of the greater use of AI in investment management

While some reports and studies have been enthusiastic about the prospects of ChatGPT in the investment domain, certain considerations need to be taken into account. The chatbot does not respond to generic queries and needs to be asked specific questions regarding data points that it can analyze and shortlist from large sets of data. Furthermore, the outcome of the replies given by technologies like ChatGPT depends on how the questions are structured based on “Human Intelligence.” In a sense, such technologies have the power to enable tools to handle data faster based on human inputs.

In fact, over the past few years, AI has been able to simplify much of the complex financial data into actionable insights, and this trend is growing. With the rapid pace of research in artificial intelligence, ChatGPT, and many more AI-powered technologies, will help make investment decisions more precise and well-researched. In summary, investing will remain a human intelligence-driven function but will be aided much more by AI, providing faster and well-researched insights.

ABOUT THE AUTHOR

Ketan Sonalkar (SEBI Rgn No INA000011255 )

Ketan Sonalkar is a certified SEBI registered investment advisor and head of research at Univest. He is one of the finest financial trainers, with a track record of having trained more than 2000 people in offline and online models. He serves as a consultant advisor to leading fintech and financial data firms. He has over 15 years of working experience in the finance field. He runs Advisory Services for Direct Equities and Personal Finance Transformation.

Note – This channel is for educational and training purpose only & any stock mentioned here should not be taken as a tip/recommendation/advice

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