ChatGPT and Your Portfolio The Risks and Rewards

They ask, “Should I buy?” — and ChatGPT answers. Across the world, a growing number of retail investors are turning to AI chatbots to guide their portfolio decisions, even as regulators warn that these tools are not a substitute for professional financial advice.

The Rise of AI-Assisted Investing

The trend is more than just anecdotal. A recent report from the trading platform eToro, which surveyed 11,000 retail investors across 13 countries, found that nearly one in five already use AI tools to help make or adjust their investments. This rush towards AI is driven by a desire to save time on research and cut down on the costs associated with professional fund management.

However, experts and regulators draw a critical line between using AI for research and receiving direct investment advice. In the European Union, providing financial advice is a regulated activity under the Markets in Financial Instruments Directive (MiFID). According to the European Securities and Markets Authority (ESMA), no publicly available AI tool, including ChatGPT, is currently authorized to perform this function.

A High-Performing AI Experiment

Despite the warnings, the potential of AI in finance is compelling. In a notable experiment, comparison website Finder launched an investment fund in 2023 that was almost entirely managed by ChatGPT. Two and a half years later, the 38-stock portfolio has seen impressive results, growing by nearly 55%. This performance outpaced the average of the UK’s ten most popular funds by more than 18 percentage points.

Yet, this success story comes with a major caveat. Experts caution that the complex and unpredictable nature of financial markets could easily disrupt the positive results of AI models like ChatGPT and Gemini, potentially leading to significant financial losses.

The AI's Own Warning Hallucinations and Risks

When asked for comment, OpenAI did not respond, so our journalists posed the question to ChatGPT itself. The bot’s response was telling: “While OpenAI hasn’t explicitly said ‘Don’t use ChatGPT for investing,’ the signals indicate that this AI tool should be used as a support rather than a replacement for professional financial advice, as it can generate plausible-sounding but incorrect answers (so-called ‘hallucinations’).”

This phenomenon of “hallucination,” where AI produces misleading results, is a primary concern. ESMA emphasizes that any firm using AI for financial services must prioritize transparency, governance, auditability, and crucial human oversight to mitigate these risks.

Expert Insights on AI's Limitations

Artificial intelligence is already reshaping the financial sector, from fraud detection to portfolio analysis. A 2025 study in Nature highlighted ChatGPT's strength in processing unstructured data like financial reports, but it also stressed the danger of biased or inaccurate input data leading to flawed conclusions.

Gaby Diamant, co-founder and CEO of the investment platform BridgeWise, provided a clear example. “If you ask a question about a company that is not very well-known, this is where hallucination will come because the chat will try to please you,” he warned. He advises against vague prompts like “Should I invest in X?” as they can yield highly misleading answers.

Diamant’s firm offers a regulated, AI-powered decision-support tool, but he is firm on the role of human expertise. When asked if AI could replace financial advisors, his answer was an unequivocal “Never.” He believes human judgment is essential for understanding a client’s unique needs and navigating the complexities of financial markets.

The Future of AI in Finance

It’s clear the technology has a long way to go before it can reliably guide retail investors. According to Kieran Garvey, the AI research lead at the Cambridge Centre for Alternative Finance, the technology for providing financial advice is “nowhere near reliable” at present.

Garvey points to a major development on the horizon: agentic AI. “The big trend that’s happening in AI... is agentic AI,” he explained. This advanced technology allows AI systems to operate with greater autonomy, enabling them to plan and execute complex tasks on behalf of a user, such as booking a holiday or managing payments.

Despite current limitations, the market for automated financial advisors, or “robo-advisors,” is booming. Projections from The Business Research Company forecast the market to skyrocket from nearly $62 billion in 2024 to over $471 billion by 2029.

Disclaimer: This information does not constitute financial advice. Always conduct your own research to ensure investments are suitable for your specific circumstances. As a journalistic website, we aim to provide the best guidance from experts. If you rely on the information on this page, you do so entirely at your own risk.