How to use ChatGPT to invest better – 07/23/2023 – Market

Artificial intelligence platforms such as ChatGPT can be an ally of financial education and function as a source of information to improve investments, say market professionals. They, however, warn that the tools should not be used for direct investment recommendations.

ChatGPT’s biggest asset is that it can provide direct information on users’ investment queries. A beginner in the financial market can directly ask the chatbot what government bonds, investment funds, CDB, CDI and any other type of application are currently analyzing.

More than that, the platform can show the user step by step how to invest in a certain asset. When asked about how to invest in fixed income, for example, ChatGPT lists investment options in the modality, guides the user to define objectives and his investor profile and instructs him to research and compare aspects of each asset.

Regarding variable income, in addition to the previous guidelines, the chatbot also advises the user to research the companies in which he is interested in investing, considering factors such as financial health, performance history, growth prospects, competition and the company’s corporate governance.

He also says that investors should diversify investments in different companies, sectors and geographic regions to reduce exposure to risk and advises that users follow news about the market. ChatGPT also warns about the risks of variable income, citing the significant fluctuations in stock prices in the market.

In neither case does ChatGPT give specific recommendations on where to allocate resources. With a more specific command, however, the tool is able to assemble investment portfolios.

A Sheet asked ChatGPT to invest BRL 10,000 in ten Brazilian assets. The platform itself, when responding, stated that predicting the performance of financial assets is challenging and that returns can vary significantly.

Furthermore, he stated that it was advisable to adequately diversify investments to reduce risk and indicated that proper research before making investment decisions was essential.

After the warnings, ChatGPT separated the BRL 10,000 as follows:

1. Petrobras (PETR4): BRL 2,000
2. Voucher (VALUE3): BRL 1,500
3. Ambev (ABEV3): BRL 1,000
4. Itaú Unibanco (ITUB4): BRL 1,000
5. B3 (B3SA3): BRL 1,000
6. Magazine Luiza (MGLU3): BRL 1,500
7. Bradesco (BBDC4): BRL 1,000
8. Renner Stores (LREN3): BRL 1,000
9. Suzano (SUZB3): BRL 1,000
10. Weg (WEGE3): BRL 1,000

According to the platform, the portfolio is only an approximate suggestion and does not take into account specific factors such as fundamental analysis or risk assessment. ChatGPT advises the user to seek guidance from a financial market professional before making decisions about investments.

At the end of the aforementioned period, the portfolio set up by the platform had an average appreciation of 21.23%.

Despite appearing to be a sound recommendation, the positive performance of the recommended portfolio was a stroke of luck.

That’s because the free version of the chatbot has updated information only until September 2021 and is unable to analyze the papers this year. In addition, the recommendation was highly favored by the exceptional performance of Petrobras shares, which accumulated an appreciation of more than 18% in the year, reaching their highest levels of 2023 in June.

During the test period, the oil company’s shares rose 15.98% and had the highest weight among those selected in the distribution of funds made by ChatGPT.

This isn’t the first test where ChatGPT has managed to build a positive stock portfolio. This year, financial product comparator finder.com showed that a selection of stocks chosen by the chatbot outperformed some of the UK’s leading mutual funds.

Finder analysts asked ChatGPT to create a theoretical fund with more than 30 stocks following parameters taken from the main UK funds.

In the eight-week period, the portfolio of 38 stocks assembled by the chatbot rose 4.9%, while the ten most popular investment funds on the British platform Interactive Investor had an average loss of 0.8%.

Additionally, a finder.com survey showed that around 19% of adults surveyed by the platform said they would consider getting financial advice from ChatGPT, and 8% have used the chatbot for finance tips.

This type of experiment can be used, for example, to obtain more information about companies that stand out on the Stock Exchange. The user can ask ChatGPT why each of these companies was chosen to compose the portfolio, providing a basis for research on the Brazilian equity market.

The tool should not be used, however, for direct allocation of resources in the roles mentioned by it. Only professionals accredited by the CVM (Securities and Exchange Commission) can recommend financial investments and operations in the securities market, and consulting a specialist is essential before allocating funds.

The recommendation of professionals, by the way, is that ChatGPT be used as an ally of financial education, especially in the first steps in the world of investments.

Fatorial Investimentos partner Jansen Costa says that the tool can, for example, help the user to better understand his investor profile and know in which applications he would feel more comfortable investing.

“ChatGPT can read a history of investments that the client has already made in his life and draw conclusions based on the way he invested over time, comparing scenarios and providing specific content for those who need to understand a certain subject”, explains Costa.

He points out that this process would be linked to the user’s personal experience, becoming a way to treat each investor individually, free of charge and quickly.

The CEO of FMB Investimentos, Fernando Bento, advises that ChatGPT be used to obtain information about applications of interest, as a more direct form of search.

“ChatGPT will discuss the types of investments, which are more risky, which are less risky, but it always warns that it cannot make any type of individualized indication, and that the investor should look for a professional to find out.

In the United States, there is a chatbot specifically for finance, called Finchat, which offers information on publicly traded companies in the American market. It is possible to ask the platform for a summary of a company’s balance sheet and request analysis of a specific aspect of its quarterly results.

After requesting a summary of Microsoft’s most recent quarterly balance sheet focusing on the company’s cloud segment, for example, Finchat not only summarizes the main points but also projects graphs with the company’s numbers over the last few years, which can be changed according to the user’s viewing preference.

The platform recommends that user commands be specific and lists which are the most used. To get a level of detail used by the chatbot, one of the recommended prompts read: “Provide a list of 10 US stocks that have annual revenue growth greater than 10% over the past five years, have stock buybacks, and have less than $100 billion in market value.”

Despite being open to free trials, most of Finchat’s features require a subscription fee.

Artificial intelligence is already used by fintechs

Artificial intelligence is also used by companies in the financial market to offer more suitable products to their customers.

The investment platform Gorila, for example, uses generative AI to separate, filter and summarize news and letters from managers, in addition to classifying content by relevance, delivering personalized texts to its users according to their interests.

“With this classification by artificial intelligence, the user is able to see directly what is relevant in an assertive way. As we begin to use these language development tools [como a IA generativa] and see the results, we were impressed with the potential, and we are still in the beginning of the possibilities”, says Assis.

Quantum Finance uses artificial intelligence to cross-reference and analyze data to offer information to financial market professionals. According to fintech’s chief executive, Maxim Wengert, technology contributes to the assertiveness of calculations and generates efficiency gains by automating the company’s tasks and operational routines.

Even with automation, Wengert points out that the analysis processes are also curated by specialists in assets and segments of the fintech financial market.

“I believe that artificial intelligence will have a strong impact on the investment area and on the financial market from now on, promoting significant changes and opening up new possibilities. AI will certainly help boost our business in the coming years”, says the executive.

In March of this year, Quantum inaugurated its Finance and Artificial Intelligence Laboratory, in partnership with the Department of Electrical Engineering at PUC-Rio, with the aim of developing new technologies and applications of artificial intelligence and machine learning for fintechs.