AI is becoming pervasive in our culture and is likely here to stay. With that in mind, I’ve been curious about what investment tips ChatGPT would give us.
I’ll admit that I’ve been a slow adopter of ChatGPT. But after testing out the Doximity AI tool recently, I’ve given more and more thought as to how we can use it. That is what ultimately led to my curiosity regarding its investment advice.
I began my investigation really skeptical. ChatGPT and similar AI-powered tools work by gathering available information online and consolidating it based on a human input prompt. And, as those of us in medical research know, “garbage in, garbage out.” And there is plenty of garbage out there in terms of investing advice.
Yet, I fearlessly went forward. Into ChatGPT I typed, “What is the best way for doctors to invest $10,000?” Results below.
What ChatGPT Recommends
“Doctors, like anyone else, should approach investing with a thoughtful strategy tailored to their financial goals, risk tolerance, and time horizon. Here’s a comprehensive plan for doctors looking to invest $10,000:
1) Emergency Fund: Ensure you have a solid emergency fund covering at least 3-6 months of living expenses in a high-yield savings account. This provides a financial buffer for unexpected expenses or emergencies.
2) Pay Off High-Interest Debt: Prioritize paying off any high-interest debts, such as student loans or credit card balances. Reducing debt burden frees up more cash flow for investing and provides peace of mind.
3) Maximize Retirement Contributions: Take advantage of tax-advantaged retirement accounts like a 401(k) or IRA. Contribute the maximum allowable amount to benefit from tax deferrals and potential employer matching contributions, accelerating your retirement savings.
4) Diversified Portfolio: Allocate your $10,000 across various asset classes to spread risk and optimize returns:
- Stocks: Consider investing in a mix of individual health care sector stocks or health care-focused mutual funds or ETFs. This allows you to benefit from the growth potential of the health care industry.
- Bonds: Invest in high-quality bonds or bond funds to provide stability and income. Municipal bonds or treasury bonds are popular choices for conservative investors.
- Real Estate: Explore real estate investment trusts (REITs) or crowdfunding platforms specializing in health care real estate. Health care properties tend to be resilient and can offer attractive returns.
- Index Funds or ETFs: Choose low-cost index funds or ETFs that track broad market indices to gain exposure to the overall market while minimizing fees.
- Alternative Investments: Consider alternative assets like private equity or venture capital funds focused on health care innovation for potential higher returns.
5) Continuing Education: Invest in your professional development through courses, certifications, or conferences that enhance your medical expertise or business acumen. This can lead to career advancement and increased earning potential.
6) Risk Management: Understand your risk tolerance and invest accordingly. Doctors often have stable income streams, allowing for more aggressive investment strategies if they’re comfortable with the associated risks.
7) Regular Review and Adjustment: Monitor your investments regularly and rebalance your portfolio as needed to maintain your desired asset allocation and adapt to changing market conditions.”
Analyzing ChatGPT’s Investment Tips
I am honestly very impressed — this is all reasonable advice. I dare say it’s better advice than one would receive from the average investment advisor. Why? It is completely unbiased.
Really, the only thing that I don’t agree with here is the small section on alternative investments. I think that investing in things like direct or indirect real estate are better options. Investing in startups should really only be limited to “fun money” that you could lose and not miss.
Furthermore, doctors too often succumb to familiarity bias when investing in startups and the like. So I think investing in health care startups, certainly with any significant portion of your portfolio, is particularly fraught with issues and risk.
In addition, ChatGPT could certainly go more in depth about pretty much all of these topics and investment tips.
Topics like creating one’s asset allocation and rebalancing require a more action oriented discussion (like this) before one can go ahead and implement the strategies.
In all, I can’t fully blame AI for not going deeper. I did put in a word limit for its response.
Meanwhile, outside of REITs, real estate investing gets no love here. I do believe in real estate, especially active investing, to be a wealth accelerant. But it is certainly not necessary for all doctors to invest in. So no major qualms there.
There is also very minimal mention of the importance of minimizing taxes and strategies to do so. That’s a miss in my book.
That said, ChatGPT’s investment advice is pretty close to mine. My top 11 ways doctors should invest their money are:
- Self-improvement
- Paying off debt
- Into their marriage or partnership
- Stock market
- Bonds
- High yield savings account (emergency fund)
- Passive real estate investments
- Active real estate investments
- Into their practice
- Buying treats
- Into a side gig
Pretty much all of these are covered directly or indirectly in these investment tips from ChatGPT. In fact, six of them are brought up explicitly. That’s pretty good!
Now, onto the elephant in the room: Can investment tips from ChatGPT replace a financial advisor?
Yes and no. First, I don’t believe that a knowledge gap is the true barrier between a physician and a smart investor who can invest on their own.
Building up your financial education does not take too long and is not too arduous. After that, it’s all about developing the automated financial habits that will make you successful — things like creating a savings rate of at least 20% of your gross income and investing it automatically each month into broadly diversified low cost index funds. Once you do that, you are pretty much set and it will not take much of your time.
Again, I don’t think the actual knowledge is the barrier. The barrier is transitioning that knowledge to action. People in general struggle with this. But doctors are even worse, likely due to immense amounts of decision fatigue.
And this is where the actual benefits of a financial advisor come in. A good financial advisor will take action using the evidence-based strategies espoused above by me and ChatGPT to meet your financial goals.
As of yet, ChatGPT can’t do that. It can only give the advice. It can’t act on it like a financial advisor would. So, if you are someone who needs help taking action, you still need a good financial advisor giving you the right advice at a fair price.
But, ChatGPT, along with your own self education, can help you identify the right advice and the corresponding fair price. Because its advice is better than any advisor that will recommend an active investing strategy. That much is more than I expected, to be honest.
Takeaways
My expectations going into this experiment were low. But ChatGPT certainly exceeded them!
However, I still need to temper things. The depth of the response and the actionability resulting from ChatGPT are limited. We still need to be active and informed when we invest, even if we plan to use a financial advisor.
After all, it is the human behavioral side of investing that is most responsible for our financial success or failure, our achievement or not of financial freedom. And AI can’t replace that!
What investment tip has made the biggest difference in your financial life? Share in the comments!
Jordan Frey, MD is a plastic surgeon in Buffalo, NY at Erie County Medical Center and the University of Buffalo. His clinical focus is on breast reconstruction and complex microsurgery. He is also the founder of The Prudent Plastic Surgeon, one of the fastest growing finance blogs. There, he shares his journey to financial well-being with a goal of helping all physicians reach financial freedom, practicing on their own terms.
Image by Ksenia Zvezdina / Getty
