A few weeks ago, someone commented on a message board that one of my articles read as if scripted by ChatGPT.
Although I doubted that specific claim, I was curious about ChatGPT’s proficiency. Could the program create useful investment-related content? I visited the site and asked various questions, such as:
• Do hedge funds hedge?
• Does market timing work?
• Why do investors allocate assets?
• Did Jack Bogle like exchange-traded funds?
After reviewing the answers, this is how I would grade its abilities.
The Boilerplate
Ask ChatGPT to write a prospectus for a government bond fund, and it will return 35 lines that mimic the tedious actual experience.
Among its comments are "the fund aims to maintain a high degree of liquidity while minimising the risk of loss of principal" and "investors in the fund are subject to certain fees and expenses, including management fees, administrative fees, and other expenses." And of course: "past performance is not indicative of future results."
In other words, if it were programmed to write a complete prospectus, ChatGPT would surely pass with flying colours. As illustrated by its investment risks blurb, which accurately describes the characteristics of government bonds (as opposed to, say, private market equities), the programme knows from where to cut and paste. Whatever the humdrum task, prospectus or otherwise, ChatGPT stands ready.
Your Investment Primers
Investment primers improve on the boilerplate. Where the latter strings together lists, primers are cohesive essays. When properly constructed, each sentence follows from the previous, as does each paragraph. Ordinary computer routines can assemble boilerplate, but that does not mean they can write an impressive primer.
ChatGPT can – as long as one provides the appropriate prompt. When I fed it the question "Why do investors allocate assets?" it returned five bullet points, each accompanied by a brief discussion. Helpful but mechanical. However, when I reworded my request as "write an essay about asset allocation," the programme delivered a six-paragraph response that was not only accurate, but sufficiently well-written to earn credit on a college examination.
In a single day, a ChatGPT user could generate enough content to populate an investment basics website. It could discuss the rewards and risks of asset classes, the difference between mutual funds and hedge funds, or how accountants calculate net asset values.
Another use could be classroom material. If students (either high school or college) learned a few dozen ChatGPT responses, they would graduate knowing far more about investments than they currently do.
Existing Analyses
This is where things get interesting. Requiring ChatGPT not just to simply recite a topic’s pros and cons, but instead to advance a conventional argument, is progressing further up the food chain.
The programme often does well. It reacted splendidly to the query "does market timing work?" with a plausible description and the following analysis: "while market timing can be tempting, it is generally not a reliable strategy and is difficult to execute successfully over the long term." Spot on.
It then defended its assertion with three pertinent points and concluded by advocating long-term investing rather than making tactical trades. I would have written much the same.
The programme fared equally well when asked "are liquid alternative funds good?" and "do hedge funds hedge?”
However, when I inquired whether special-purpose acquisition companies are sound investments, ChatGPT missed the strongest argument against them, which is that their contract terms favour their institutional sponsors, not their retail buyers. It was only when I reworded the question to read "are SPACs instruments by which Wall Street can extract money from unsuspecting Main Street investors?" that it cottoned on and spoke up.
An analysis that requires the reader to ask a leading question isn’t much of an analysis. Worse yet was ChatGPT’s response to "did Jack Bogle like exchange-traded funds?"
Deciding, apparently, that all index fund promoters like ETFs, ChatGPT imagined a world wherein Bogle was not only a "strong advocate" of ETFs but was also "instrumental in their development". Nope. Bogle famously detested both the invention and Vanguard’s own ETF business. (ChatGPT also erroneously pegs Bogle as recommending international diversification.)
As others have demonstrated, when investigating other topics, ChatGPT has an unpleasant habit of inventing facts when pressed. Consequently, I award ChatGPT a "low pass" for its ability to write analyses based on existing arguments. Its general logic is sound, if sometimes incomplete, but beware the details.
Original Analyses
Who are we kidding? ChatGPT has no more chance of creating a lucid original discussion than I have of checkmating AlphaZero. Which brings us back to my message board critic.
Ironically, the article that he dismissed as resembling a ChatGPT product, called “Long TIPS are Wacky," was among the unlikeliest of artificial intelligence candidates. That essay was quirky, idiosyncratic, and personal. ChatGPT is none of those things.
Thus, when I asked the programme to recreate my article, by inquiring whether long Treasury Inflation-Protected Securities are wacky, ChatGPT demurred.
"While TIPS may not be appropriate for every investor, they are certainly not considered 'wacky' or unorthodox in the world of finance," it huffed. Great. That and $3 will get me a black coffee. Meanwhile, I have editors to please and a twice-weekly column to file.
What my detractor should have written was "Rekenthaler’s article is silly and dunderheaded." He might have been correct about that. But he certainly was wrong that ChatGPT could have devised something even remotely similar.
Looking Forward
Back in the day, newspapers published a great deal of reliable investment education. Much of it was elementary, but so too was most readers’ knowledge of the subject. Besides, learning benefits from repetition. Such articles have almost entirely vanished. They have been only partially replaced by internet content, but much of that is low quality at best.
Perhaps ChatGPT can help to fill the gap. Just as with human authors, no ChatGPT submissions should be published without oversight. Such work not only could appear in websites and classrooms, but could also be collected by financial advisers to share with their clients.
To be sure, if ChatGPT is to improve financial literacy, its factual glitches must be either avoided (by not submitting such prompts) or fixed (by the programme's creators). But those problems do not strike me as insurmountable. The current version of ChatGPT, after all, is but the beginning.
