Artificial investments: ChatGPT and Bard face off against top funds
Artificial intelligence may play a role in the stock selection process, according to new research by Finder.
Finder compared the performance of Australia's top investment funds against AI-designed portfolios – ChatGPT and Bard – over a 3-month period to see which would perform better.
The analysis revealed Bard outperformed both ChatGPT and the top 10 listed managed funds in Australia – holding 19 stocks and rising 8.2% on average between May and August 2023.
This was followed by the top 10 listed managed funds, which rose 6.3% on average, and the portfolio created by ChatGPT holding 23 stocks which rose 4.21% on average.
ChatGPT and Bard were both asked to create a stock portfolio using the main investment strategies and approaches used by the top 10 managed funds in Australia.*
ChatGPT selected 23 stocks, mostly from the United States. Its portfolio was diversified across sectors and included some stocks from Australia, the UK and parts of Asia.
Bard on the other hand, selected 19 stocks, mostly from the US and largely within the technology sectors.
To put fund managers to the test, the 10 most popular, actively managed** listed funds on the ASX were used as a benchmark. Popularity was rated in terms of funds under management.
Funds included in the top list were: The Magellan Global Open Class Units fund (MGOC), Vanguard Global Value Equity Active ETF (VVLU) and BetaShares Australia Top20 Equity Yield Maximiser Fund (YMAX).
While some of these funds did individually outperform each of our competitor portfolios, the average performance of all 10 funds did not.
Kylie Purcell, investment expert at Finder, said while Bard had the top-performing portfolio, the biggest winner was actually the S&P 500 index, which rose 9.3% over the test period.
"Ultimately the study shows just how difficult it is to beat the market, whether you're a top fund manager or an AI-powered chatbot."
Fewer Australians are investing in the stock market
Finder's Consumer Sentiment Tracker found that 6.9 million Australians, or 34% of the adult population were directly invested in shares in August 2023, down from 36% 12 months prior.
The fall continues a trend since 2021 when ownership peaked at 42% in October of that year.
The typical share owner has $65,501 invested in August – down from $79,383 in May 2023.
Purcell said Aussies were less prepared to invest during the cost of a living crisis.
"Surging prices of essentials and interest rates has many Aussies feeling worse off this year.
"Less people are investing – even those investing are allocating less to their shares."
Purcell urged Aussies to review their finances.
"Question where every dollar goes and whether it could be better redirected into the share market.
"Continuing to invest during difficult times could fast-track your financial goals.
"Passive income is more important than ever as inflation burns a hole in household budgets.
"Every successful investor started somewhere – so if you can lay the foundations while times are tough you'll unlock the discipline needed when cash flow eases up again," Purcell said.
*Both AI platforms will not create a portfolio if you ask directly, but can for demonstration purposes. When asked, ChatGPT will tell you, "I'm sorry, but I can't provide specific stock recommendations. Investing in stocks requires careful consideration of your financial goals, risk tolerance, and market conditions."
**Although the most popular funds in Australia are passive index funds, these were excluded from the list because these types of funds seek to simply mimic a market, rather than outperform it. For a fair comparison, only funds that offer stock portfolios and excluded any single industry thematic funds were used.
For the full analysis, go to https://www.finder.com.au/chatgpt-stock-portfolio.