UPDATE: A new experiment reveals how technology can aid in investing, as ChatGPT was recently tasked with curating a portfolio of FTSE 100 stocks to generate a passive income of £2,000 per month—or £24,000 annually. This intriguing venture highlights the potential and limitations of AI in financial decision-making.
In an effort to create a viable income stream, the user sought a selection of stocks yielding an average of 5% per year, surpassing the typical blue-chip yield of 3.25%. Achieving this goal requires an investment of approximately £480,000, a substantial figure that many investors aim for over decades through consistent contributions to a Stocks and Shares ISA or Self-Invested Personal Pension (SIPP).
ChatGPT responded swiftly with several stock recommendations, including the insurer Legal & General Group, noted for its strong yield around 8%. However, the trailing yield is closer to 9%, raising questions about the reliability of ChatGPT’s financial insights. While Legal & General boasts solid cash generation and a history of generous income, its stagnant share performance over the past decade is a significant concern.
The second pick from ChatGPT was M&G, another financial sector giant, also yielding around 8%. Its historical performance has been superior to that of Legal & General, indicating potential for investors. However, experts stress the importance of diversification in constructing a balanced portfolio.
Moving forward, ChatGPT suggested National Grid, describing it as a stable choice with predictable income. Yet, the AI inaccurately claimed a yield of 6%, while the actual figure stands at just 4.1%. Concerns about National Grid’s heavy debt load exceeding £40 billion and significant investment needs to modernize the electricity grid raise red flags for many investors.
Additionally, ChatGPT included consumer goods leader Unilever, which has faced scrutiny for its growth prospects and a modest 3.25% dividend yield. The oil giant Shell was also mentioned, with a yield of 3.9% attributed to strong cash flow and shareholder returns. However, ChatGPT’s portrayal of Vodafone as a wildcard with a yield of around 10% is misleading, given its recent dividend cut that halved yields to 4.27%.
While some of these stocks may have merit, experts caution against relying solely on AI for stock selection. Investing remains a deeply personal endeavor, requiring thorough analysis beyond the capabilities of a chatbot. This experiment underscores the importance of informed decision-making in retirement planning and investment strategy.
As AI continues to evolve, it remains critical for investors to conduct their own research and consider diverse insights before making financial commitments. For those interested in building a robust investment portfolio, exploring a variety of sources and strategies is essential.
Watch for further developments in AI-assisted investing and its implications for personal finance as technology continues to reshape the landscape.
