ChatGPT Fund: Investing with AI [2024]

While many hedge funds have been using AI to guide investment decisions for years, the concept of a ChatGPT fund has democratized access to this technology to the general public.

ChatGPT has unlocked some exciting capabilities to help retail investors gain an edge against Wall Street.

However, it’s important to keep in mind that AI technology is not perfect and will often provide incorrect or misleading information.

Therefore, we need to be smart about how we leverage tools like ChatGPT to inform our financial investments.

In this post, I will explain what the ChatGPT fund is and go into depth about how you can use ChatGPT for stock trading.

Let’s dive in!

Disclaimer: Please note that I am not a financial advisor and this content is for educational purposes only.

Table of Contents

What Is The ChatGPT Fund

ChatGPT fund is an experimental fund that let ChatGPT pick stocks based on a series of commonly used financial metrics like revenue growth history, debt coverage, and profitability.

Additionally, ChatGPT traded based on sentiment analysis of market news related to certain stocks.

For example, negative coverage or a poor earnings report would lead to a recommendation to sell a position or avoid investing in a particular name.

How ChatGPT Fund Works

A ChatGPT fund works by providing ChatGPT or one of OpenAI’s APIs access to a brokerage account and the ability to make buy and sell stock trades.

An initial UK-based experiment using ChatGPT yielded promising initial results. This particular fund outperformed a selection of UK investment firms, as well as the S&P 500.

However, the experiment only ran for a short period of time.

In order to properly assess an investment strategy, it would be ideal to have more than a few years worth of performance history.

GPT Portfolio

A more recent ChatGPT fund is called The GPT portfolio.

This project says it is “exploring whether ChatGPT can pick stocks better than hedge funds.”

The general investment process is:

ChatGPT API analyzes over 10,000 market headlines
Each headline is graded with a sentiment score (positive or negative)
ChatGPT analyzes the financial statements of the top 100 graded stocks
The top 20 stocks are then invested in
Buy and sells happen 1 to 2 times per week

The portfolio was funded with $50k to start and is being run through a service called Autopilot which lets users copy trade, or piggyback on, various investment strategies.

So far, about 25,000 people have staked a combined total of $14.5M behind the GPT portfolio strategy.

ChatGPT For Stock Investing

Many hedge funds today use algorithmic or high-frequency trading to realize market-beating returns.

However, while ChatGPT can now access real-time data, the platform still requires a high degree of prompt engineering and proprietary data to have a realistic chance of outperforming the S&P 500.

Again, I’m not a financial advisor.

But here are some ways you might use ChatGPT in your research process:

1. Information Retrieval:

You can use ChatGPT to pull up general information about financial topics, stock trading concepts, financial analysis, and more.

It can provide information on how stocks work, what factors affect their prices, what financial ratios are, and other foundational knowledge.

This might seem trivial but understanding core financial principles are critical if you want to protect your capital.

2. Explaining Financial Reports:

ChatGPT can help explain the terminologies and elements found in financial reports like balance sheets, income statements, and cash flow statements.

Understanding these reports is vital to making informed investment decisions.

3. Investment Strategies

There are several different philosophies behind how to invest your money.

ChatGPT can help simplify this universe by providing explanations of various investment strategies such as value investing, growth investing, or dividend investing.

4. Risk Assessment

Use ChatGPT as a devil’s advocate to help you identify potential risks and downsides behind a particular investment decision.

This will help you manage these risks effectively and avoid unnecessary losses.

5. Scenario Analysis

Sometimes it helps to have a thought partner when you are weighing the pros and cons of an investment decision.

You can use ChatGPT to discuss hypothetical scenarios related to trading to better understand potential outcomes and strategies.

6. Technical Analysis

Trading stocks based on price charts is a tough way to make a buck.

But there are tons of resources online to learn technical analysis if you’re interested in going down this path.

ChatGPT can be your personal 24/7 teacher to explain various technical analysis concepts such as chart patterns, indicators, and more.

7. Behavioral Finance

It can be very easy to find yourself influenced by the investment hivemind on social media.

With ChatGPT you can run certain ideas by the AI to see how cognitive biases might be affecting particular investment decisions.

Loss aversion and herd mentality are particularly common biases that lead to the loss of capital.

8. Interpreting Economic News

As I mentioned earlier, ChatGPT can be used to evaluate the sentiment and potential impact of various types of economic news on the stock market.

This is largely how the ChatGPT fund and many of its spin-off projects operate.

This method works best by automating the process with the ChatGPT API so that you can evaluate hundreds of new headlines at a time.

You can access this via the OpenAI playground.

Conclusion

To wrap things up, the ChatGPT fund experiment has helped illustrate the potential power of leveraging large language models like ChatGPT to guide investment strategies.

However, you shouldn’t blindly trust your money with ChatGPT quite yet.

Trading bots aren’t a new phenomenon.

And often these automated strategies are quickly rendered obsolete by the market.

The best way to use ChatGPT for investing today is as an educational tool and thought partner to help guide your own investment philosophy.