Can Mutual Fund Investments be made based on ChatGPT advice?

You have probably already heard about ChatGPT, an AI chatbot that has taken the world by storm. People in various industries have shared their thoughts on what this technology is for and how it could change the world. From programmers to marketers, everyone is using ChatGPT to their advantage. But, as an investor, should you use ChatGPT as an investment advisor?

Wouldn't it be interesting to have a robo-advisor for mutual fund portfolio management? But is it safe to take advice from an online mutual fund advisor like ChatGPT, or is it not? Keep reading to find out.

What is ChatGPT, and how does it work?

ChatGPT is an AI tool that mimics human conversational capabilities. It can generate written content, emails, help with code, etc. Because of its versatility, professionals in different fields use ChatGPT as it helps them quickly generate text-based responses to their prompts.

The GPT stands for generative pre-trained transformer, and this is what goes behind the scenes. It uses a language model called GPT 4, which guesses the next words in a phrase. It uses machine learning and algorithms to understand the prompts we provide. Thus, it trains itself to provide the best answer based on feedback provided by previous users.

You use ChatGPT for mutual fund advice?

As ChatGPT is relatively new software, you must proceed with caution. Trusting the tool to take care of your investments entirely can be catastrophic. Furthermore, these are other reasons why you must not take ChatGPT investment advice that quickly. Let us take a look at them.

1. Old data

While ChatGPT has a lot of resources and data to back it up, it still has a cut-off date, i.e., September 2021. As a result, it does not have the latest data, which is essential for making fruitful investments.

So, if you like to invest in mutual funds based on recent financial data, you cannot with ChatGPT.

2. It is a chatbot

ChatGPT is designed to be a general-purpose chatbot that reads the user's prompts and responds. It is not intended to be a dedicated virtual finance advisor. So, a lot can go wrong if you solely rely on ChatGPT for investing your hard-earned money. 

For instance, you want to see a company's performance for a particular year. It will give you those results without any context on its risks and your returns on investing in that company's stock.

3. Lack of important financial data

When you need to invest in a company, there are many things you must consider. First, you may need relevant and recent news that ChatGPT cannot provide. Next, details like stock valuation are not available, too, making it difficult to use ChatGPT as your only finance advisor. 

How to effectively use ChatGPT in investment decision-making?

While we discussed the limitations of ChatGPT above, it also has its advantages. Here are some ways you can use ChatGPT to make investing decisions.

1. Understanding the investing jargon

Understanding new investing concepts and jargon can be challenging for beginners and casual investors. However, with ChatGPT, you can understand these concepts with ease. 

For instance, you can ask ChatGPT to define a term, give examples, or translate the text into your native tongue. 

2. Access to detailed information

While access to the latest news and stocks is not available, you can still use it to get other information. Details such as the company and its background, past performance (pre-2021), and competitor information are all possible to get from ChatGPT. A seasoned investor can use this information to make accurate decisions, including evaluating risks and forecasting returns.

3. General investing advice

Investing differs from company to company and from person to person. However, you can still get a basic overview of general investing advice with ChatGPT. Say, you are confused about a certain mutual fund category and its best tips to invest in; a prompt in ChatGPT will clear that doubt in your mind. 

Ready to invest in mutual funds?

Mutual funds are beginner-friendly investments as professional portfolio managers manage them. So, you do not need a virtual advisor to assist you in investing in a mutual fund. However, knowing how to use ChatGPT can help you understand the basics of mutual funds or investing in general. If you want to invest your savings, turn to Tata Capital Moneyfy. We have the best-performing mutual funds from over 40 AMCs. Moreover, AI mutual funds advisors are no match for our experienced portfolio managers. Download the Tata Capital Moneyfy app or visit our website to start your investment journey.