What is a bot?

A bot is a software application that is programmed to do certain tasks. Bots are automated, which means they run according to their instructions without a human user needing to manually start them up every time. Bots often imitate or replace a human user’s behavior. Typically they do repetitive tasks, and they can do them much faster than human users could

In the world of investing, bots help remove emotions from investment decisions. Functions like these make them even more valuable for neophyte traders than for expert

A subset of the bot world is the chatbot. A chatbot is a computer program that uses artificaila intelligence (AI) and natural language processing (NLP) to understand customer questions and automate responses to them, simulating human conversation

Chatbots can make it easy for users to find the information they need by responding to their questions and requests—through text input, audio input, or both—without the need for human intervention

Nowadays AI chatbots use natural language understanding (NLU) to discern the user’s need. Then they use advanced AI tools to determine what the user is trying to accomplish. These technologies rely on machine learning and deep learning  – elements of AI – to develop an increasingly granular knowledge base of questions and responses that are based on user interactions. This improves their ability to predict user needs accurately and respond correctly over time

But are they any good?

Unless you’ve been living under a rock, you’ve probably heard chatter about AI intelligence, specifically the chatbot known as ChatGPT. ChatGPT has become a phenomenon, attracting over 100 million users who have given it a whirl, posting their results and marvelling at its ability

NMTBP thought we’d test it, asking it questions about investing, to see how good it is. The experience was eye-opening and surprising. See if you agree

Questions and answers

Here are some of the questions NMTBP asked the chatbot, along with its answers and some commentary

What are the best personality traits to have for investing in the stock market?

‘The best personality traits for stock investing include patience, discipline, and an aptitude for research. Additionally, it is important to be comfortable with taking calculated risks, have the ability to think critically and objectively, and have the capacity to remain objective and unemotional during times of volatility’

A pretty good answer as we’re sure you’ll agree! Mind you, it could go on to explain that I would add more, though, explaining that, if investing requires that much skill, you could simply invest regularly in low-fee index funds for many years, building wealth (hopefully!) thay way

Are growth stocks or value shares better?

‘The answer to this question depends on your individual financial goals and risk tolerance. Growth shares are typically characterized by higher levels of risk, but also the potential for higher returns. Value shares, on the other hand, tend to have less risk but also may offer lower returns. It’s important to do your research and speak to a financial advisor to determine which type of shares are best for you’

This answer is also a reasonable one  – though it doesn’t point out that there are sharess that have both growth and value characteristics. In other words, they can be growing fairly briskly and also be undervalued at times. Good recent examples are Amazon.com, and Meta Platforms , both thought to be undervalued by many experts

The recommendation to speak to a financial advisor will serve many people well, but it’s probably not necessary for everyone, as some people have learned enough to advise themselves

What are the characteristics of a great company?

‘A great company typically has strong financial fundamentals, a competitive market position, and a long-term growth strategy. Additionally, a great company should have a strong management team, clear financial goals, and a culture of innovation and customer service’

Another good answer, though it doesn’t mention that it’s also advantageous for a company to have one or more sustainable competitive advantages, such as a powerful brand, proprietary technology, economies of scale, etc.

Also, different kinds of companies will appeal to different investors. For some people, a great company will be continually innovating, while aiming to grow fast. It may, therefore, not pay any dividends. Other investors may prefer great companies that are more established slower growers, with more predictable earnings and dividend payments

What’s your best investing advice for the rest of 2023?

‘My best investing advice for 2023 is to create a diversified portfolio of low-cost index funds or exchange-traded funds (ETFs). Additionally, it is important to do your research, monitor your investments, and speak to a financial advisor to ensure that your investments are appropriate for your individual goals and risk tolerance’

This is more general, and possibly not best for everyone. Some people who have been in index funds for a while and have been learning more about investing may want to start adding individual stocks to their mix now. And  ETFs aren’t mutually exclusive with index funds — many ETFs are index funds. Those who are approaching retirement in 2023 might consider taking different steps, too, such as adjusting their asset allocation, and perhaps reducing their exposure to shares

A salutary reminder to one and all!

Should you employ a chatbot as your new investment advisor?

Given that ChatGPT does offer some sound advice, should you trust it to guide how you deploy your hard-earned money? Not at all. Go ahead and have fun with it, seeing how it answers your queries, but remember that its answers are general, and often a bit incomplete. And sometimes wrong. After all, it’s still learning