ChatGPT - A Game Changer in Finance & Investing
Did you ever try talking to an old-school chatbot? The experience was totally off-putting - the entire interaction felt nothing like a conversation. Take an example of an issue regarding your Amazon order. The Chatbot just threw standard phrases and answers back out at your questions. No matter what you ask, the range of answers by the chatbot felt limited, and you never felt your query was being resolved. You could cancel or return the order through the chatbot. But ask the chatbot to give some negative feedback to amazon’s team (in some nicely chosen words 😉) and you couldn’t.
A chatbot has advantages for Amazon; it means most of their call center employees are free from the routine work of canceling orders. The automation of chatbots reduces their workload. But the customer is left unsatisfied as direct human interaction feels more genuine and assuring.
Now, this has changed. There’s a chatbot in the market that can solve all the above problems. It sounds conversational, similar to how we talk with a human being. In short, it’s a dialogue rather than a monologue! Yes, we are talking about ChatGPT.
The Popularity of ChatGPT
ChatGPT took the world by storm within days of its launch.
I’m sure you’ve spent nights binge-watching a show on Netflix, ranted at random people on Twitter, and watched endless reels on Instagram. These platforms are popular for sure, yet the popularity of ChatGPT overshadows all of these. This underlines the curiosity of people, but more importantly, it highlights the potential of this technology. More about it later in this article, but first, let’s understand one thing.
What is ChatGPT?
Using a large dataset and machine learning, this model is trained to understand queries and provide human-like responses. Here’s an answer straight from ChatGPT itself!
GPT (Generative Pre-trained Transformer) technology has progressed over the years. ChatGPT uses the latest and most advanced model - GPT-3 technology. The key upgrade in GPT-3 over the previous versions is that GPT-3 is trained on 175 billion machine learning parameters. Compare this to GPT-1, which was trained on 117 million parameters. ChatGPT can generate human-like text responses with just a small input. The system analyzes the language and uses a text-predictor tool to create the most likely output.
It was developed by OpenAI, a non-profit organization formed in 2015 by Elon Musk and Sam Altman. OpenAI is focused on democratizing Artificial Intelligence; making it available to all rather than just a few large companies.
Think of Google. Ask “How to calculate the age of earth?” and it will come out with this 👇
Now here’s the same question but answered by ChatGPT:
You don’t need to search through different links; rather a ready-made and in-depth answer is created for you. The more questions you ask, the more information you can find about the topic. Although on the face of it, ChatGPT seems only a text-based response-generating tool, it can be used for many things, including:
Drafting a legal contract
Writing essays and reports
Summarising a complex research paper
Solving mathematical problems & equations
The possibilities are endless, the trick is: 👇👇
We decided to try and find some use cases in the field of finance and investing.
Bank employees would love to avoid being disturbed by customers who visit and ask basic questions such as to how to do a money transfer or close an account. If the bank gets ChatGPT involved, the customer could just type the question and the chatbot would provide them with a detailed procedure including the forms to be filled, people to be visited and other formalities involved. A customer trying to find out online doesn’t need to click on the multiple options to figure things out. Just ask the right question!
Now, replace the banks with brokers, financial institutions such as hedge funds, ETFs, insurance providers, distributors etc. Could ChatGPT one day be the go to chatbot for all of them.
Tax laws and regulations change every year. The majority of countries have complex tax laws and a host of surcharges added if you file something incorrectly. Calculating your income and expenses is also a headache. Can this be taken care of by ChatGPT?
With a few inputs, it could calculate your tax liability. It can help you find where each income source should be categorized. In fact, perhaps one day individuals won’t need tax professionals if a customized tool can be developed based on GPT-3 technology.
For the chartered accountants that are still needed, ChatGPT can help fetch their clients’ data with ease. It can help segregate the clients whose tax filing needs a more elaborate treatment - helping tax professionals provide a better service to their clients.
At the moment stock analysts have to go through a company’s annual report, investor calls, and research reports. They then have to connect the dots between the information and facts from different sources to arrive at a conclusion about the business. Imagine doing that for multiple businesses in the portfolio - a task, that at present, is often done by a team of analysts and takes weeks. ChatGPT can provide the same information in a few minutes.
Multiple mutual funds can customize this model based on their existing report format. Once trained, the model can generate reports on specific businesses, industries, provide stock recommendations, and a summary of positives and negatives that are easy to understand. The inputs from ChatGPT can help to simplify the decision-making process and reduce the workload of analysts and money managers around the world.
Have you come across the term predictive analysis? It involves using historical data to predict future events and probabilities. The GPT-3 algorithm can be trained on historical data of the stock market to predict future movements. Technical traders can use the historical stock prices of businesses to predict the future movement of the stock price. The data regarding various technical indicators and their historical trend can be used to generate insights for the future.
Much of stock research involves analyzing ratios, running models and plotting different charts and graphs. As ChatGPT can solve equations, it can calculate financial ratios and even create a chart using python code to make visualizing the data even easier.
Momentum investing is a well-known strategy in the finance world. Investors following this strategy invest in stocks that have already risen, believing they will continue to rise and look to sell when the price reaches what they believe to be its peak. Stock market investing in the short term is thus a sentiment rather than a science.
The various news reports and coverage in the media about a business can be used to understand the overall mood and sentiment regarding a business. ChatGPT can also be used to filter out unrelated news that appears in the media related to the business. It can be used to query daily updates and happenings. Imagine manually searching on google or going through different newspapers, magazines, and publications just to gather all this information. In a few years, we might be able to just ask ChatGPT for the most related news and then go through it ourselves.
Formula based trading can be done through ChatGPT. ChatGPT can give you python code to perform certain functions. It can help you find free resources to fetch stock market data. It can also tell you what editor, libraries, frameworks, and APIs need to be used.
As you can see below, this has already been done with impressive results - and it’s only going to get better over time!
If you’re already an investor, you might have already listened to a company earnings call or read an annual report. Now, ChatGPT can read through this data and generate summaries for you to read.
Understanding key financial terms could be a daunting task for newbie investor. Just ask ChatGPT and it will answer in the simplest way. No need to search through various websites, read books or tutorials to learn these terms.
The possibilities when using ChatGPT seem almost endless. But as with anything in life, there’s a downside to every upside. ChatGPT has its limitations. ChatGPT it’s currently trained on data up to 2021. So it can’t fetch data about anything that occurred more recently than that. As well as this, its responses, although accurate to a large extent, can never be trusted at face value, and it often seems very confident when saying something completely incorrect.
ChatGPT will open up new avenues for the financial and investment sector. It will help automate mundane tasks and free up time for the creative strategizing and critical thinking done by humans, hopefully with the assistance of AI.
Now, the million-dollar question: Will ChatGPT take my job? The job of an investor, analyst, fund manager, tax advisor, call-center executive. No! As said by renowned entrepreneur, investor, and author Naval Ravikant:
"Technology destroys jobs and replaces them with opportunities."
Article By: Finalysis20
Individual investor & a content writer in the domain of personal finance & investing. Loves to write blogs, articles & shares insights through tweets & threads.
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