AI investment advice: danger or opportunity for private investors?

AI investment advice: danger or opportunity for private investors?

The use of artificial intelligence (AI) in the financial world is constantly increasing, especially among young investors. As the NZZ reports, teenagers and large fund companies use AI tools like ChatGPT to optimize their performance on the stock markets. The free tool, developed by OpenAI, has the potential to search financial news and business reports for investment tips. But the tips provided by ChatGPT could quickly be absorbed by the markets, causing them to lose value.

The difficulties retail investors have in achieving consistent excess returns (alpha) are well known and often depend on insider knowledge or unique analytical skills. Analysts warn that using AI for targeted stock tips is seen as problematic. For example, large language models tend to favor popular stocks that are widely reported on and in some cases can even provide false information, which is known as hallucination.

Diverse possible uses of AI in the financial sector

Nevertheless, the use of AI is not exclusively negative. The Broker comparison highlights that AI can be used as an investment advisor, with the quality of the answers heavily dependent on the precision of the queries. For example, ChatGPT can provide useful information about diversified portfolios, tax advantages and disadvantages, as well as various investment strategies such as the value approach or the buy-and-hold strategy.

This gives investors the opportunity to expand their financial knowledge and also better understand risks, such as leveraged financial products in volatile markets. AI can also help analyze large amounts of data to identify patterns and opportunities in the market.

Artificial intelligence: A trend with potential

Since ChatGPT was released in November 2022, a worldwide hype has developed around artificial intelligence. Interest will remain unbroken in 2024, with further innovative AI applications such as Google “Gemini”, Microsoft “Copilot” and IBM “Watson”. Investors can benefit from these AI trends by investing in AI technologies or using AI to support investment decisions.

However, it is important to note that not all AI-powered solutions necessarily deliver the best results. Research shows that AI-based ETFs typically underperform traditional indices. Nevertheless, these ETFs offer a way to invest in the AI ​​trend and reduce risk through diversification.

Although investors cannot invest in OpenAI directly, there is an opportunity to do so indirectly through companies such as Microsoft, Amazon and Nvidia that are invested in OpenAI. The long-term impact of the AI ​​hype on financial markets could be significant, with AI seen as a key technology of the future.