When ChatGPT Met Warren Buffett

When AI gives you financial advice, it’s both mind blowing and a bit scary…

Jocelyn Jovene 19 December, 2022 | 10:34AM
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A recent article from The Economist about a generative-artificial intelligence service called “ChatGPT” awakened my curiosity.

Before long I registered on the site and had a go at what I think and hope is in my circle of competence: investing.

My question was basic: “What is the best strategy to make money in the stock market ?”

This is what chatGPT replied, in full quotes:

“There is no one-size-fits-all answer to this question, as the best strategy for making money in the stock market will depend on a number of factors, such as your financial goals, risk tolerance, and investment timeline. However, some general strategies that may be helpful include:

Diversify your portfolio: Don't put all your eggs in one basket. Instead, spread your investments across a variety of different stocks, industries, and asset classes to reduce your overall risk.

Invest for the long term: The stock market can be volatile in the short term, so it's important to have a long-term perspective when investing. This will give your investments time to ride out any market downturns and potentially benefit from long-term growth.

Use dollar-cost averaging: This involves investing a fixed amount of money in the stock market on a regular basis, regardless of the current market price. This can help you average out your purchase price over time and potentially reduce the impact of market volatility on your investments.

Research before you invest: It's important to thoroughly research any companies you're considering investing in to make sure they are financially healthy and have a solid track record. This can help you make more informed investment decisions and potentially improve your chances of success.

Overall, the key to making money in the stock market is to have a well-thought-out strategy and to be patient and disciplined in your approach.”

Some Buffett, Some Morningstar

To be honest, it blew my mind.

I did not expect such an articulate answer which, in my mind, made me think: this is pure Warren Buffett.

Yes, the first part of the answer is classical financial advice: diversify.

But then, it reminds the reader that the key to financial success is to be focused on the long-run, to pay attention to costs, always make one’s own mind before investing (and not rely on other people’s opinions) and to be disciplined and patient.

Pretty much in line with what we say at Morningstar.

This last part of the answer to me was the most impressive, since it’s not something you hear a lot from the mouth of investors.

If patience and discipline where the core values of any investor, I figure we wouldn’t have bubbles and crashes in the stock market.

Remember what Benjamin Graham used to say: “The investor's chief problem - and even his worst enemy - is likely to be himself.”

Obviously, this wisdom and some other words from Buffett and his long time partner Charlie Munger probably fed into the training of ChatGPT.

Just search "charlie munger 24 causes of human misjudgment pdf" to see how much material the system has access to.

I’d personally be curious to understand how the system decided that these psychological traits were more important than others. And how it was able to stay on a rather high level of abstraction and not a too technical one. For instance one answer I would have expected could be: "Look for high return on invested capital stocks and wait until they provide a wide margin of satefy to their intrinsic value."

I therefore decided to ask further questions and see where it goes. I am expecting more surprises along the way.


The information contained within is for educational and informational purposes ONLY. It is not intended nor should it be considered an invitation or inducement to buy or sell a security or securities noted within nor should it be viewed as a communication intended to persuade or incite you to buy or sell security or securities noted within. Any commentary provided is the opinion of the author and should not be considered a personalised recommendation. The information contained within should not be a person's sole basis for making an investment decision. Please contact your financial professional before making an investment decision.

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About Author

Jocelyn Jovene

Jocelyn Jovene  is Senior Financial Analyst and Senior Editor for Morningstar France.

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