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‘I asked ChatGPT where to invest £10,000 – so far I’m down 24pc’

ChatGPT logo and rising stock graph are seen in this illustration - REUTERS/Dado Ruvic/Illustration/File Photo
ChatGPT logo and rising stock graph are seen in this illustration - REUTERS/Dado Ruvic/Illustration/File Photo

In February I asked ChatGPT to invest for me and make a portfolio to grow my savings.

Since the chatbot launched in November 2022, users have been asking it to pen songs, provide recipe suggestions and rewrite their CVs.

Why not, I thought, use its vast, artificially-intelligent brain to weed out lucrative stock market investments.

In theory ChatGPT should be the perfect stock picker because of its ability to process detailed financial documentation in no time at all.

I decided to put this to the test and asked the chatbot which stocks I should invest £10,000 in for high returns. I then did the same for funds. But, so far, it is not looking good.

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My fund portfolio is down 13pc and the performance of my stock portfolio is even worse.

It is a good thing I did not actually put any money on the table or I would have lost a quarter of my initial investment betting on its stock recommendations by now.

As well as Apple, Amazon and Visa, the chatbot suggested I bet big on Microsoft because of its “strong market position and growth outlook”.

Of course, Microsoft just so happens to be a major investor in ChatbotGPT’s creator OpenAI.

Last week the firm launched ChatGPT-4, its latest update. It said it had developed “more advanced reasoning skills” on the chatbot, meaning it is possible its stock-picking ability may have improved since I asked for its recommendations.

However, Laith Khalaf of investment firm AJ Bell told me ChatGPT's selection left much to be desired, when I asked him to review its choices.

“Calling it a portfolio is a bit of a stretch, seeing as you need at least 25 to 30 stocks to achieve a reasonable level of diversification,” he says.

“Pumping your wealth into each of these four companies would leave you with an unconscionable amount of stock-specific risk.

“ChatGPT hasn’t exactly scoured the four corners of the global stock market for hidden gems either – the four stocks chosen are some of the largest in the world and are all listed in the US.”

“Perhaps unsurprisingly Chat GPT is quite keen on the technology sector when it comes to investing, perhaps a sign it’s intelligent enough to worry about its funding being pulled,” Khalaf adds.

ChatGPT's affinity with tech also reflects its limited knowledge reach.

Although the chatbot has vast reserves of data, it is restricted to events that took place before 2021. In other words, it is stuck in a world where US tech giants are still on the up.

In all fairness to the chatbot, I have checked the value of my portfolio at a time when equity markets are still reeling from troubles at SVB and Credit Suisse banks.

The FTSE 100 has fallen 7pc in the past month while the S&P 500 had dropped 1.3pc in the same period.

Conventional wisdom has it that I should stay invested for at least five years to give myself a better chance of riding out the market volatility and, fundamentally, these are “perfectly good companies”, according to Khalaf.

Meanwhile, in my fund portfolio, things are looking a little brighter.

The best performer so far is the Vanguard FTSE All World High Dividend Yield ETF, which is up 3.36pc.

Over five years, the fund has returned 29pc for investors, so it looks like a decent long-term bet. The other three, however – Fidelity Global Dividend, T Rowe Price Global Focused Growth Equity and Baillie Gifford Global Discovery – have all fallen (Baillie Gifford by a huge 38pc because of its high exposure to tech stocks).

But Kahlaf says this was a fairly well-diversified spread of investments.

“Whether by accident or design, Chat GPT has done a reasonable job of picking four funds for a portfolio, with a blend of growth and value approaches. It’s also stuck to global funds which means the portfolio has reasonable levels of regional diversification,” he says.

“Perhaps what is missing is any consideration of the specific needs of the investors.

“A more risk averse investor might require some bonds, cash and alternatives alongside a global equity portfolio. While Chat GPT has produced two income funds in its suggestions, an income investor might want all of their portfolio producing an income, rather than also focusing on capital growth.”