I’m looking to buy some shares for my Stocks and Shares ISA and decided to call in a bit of artificial intelligence (AI) to supplement my own. ChatGPT has its virtues, but it also has its limits. Even so, it’s fun to experiment, so I asked it to build a balanced portfolio for a long-term investor targeting a blend of income and growth.
One virtue of ChatGPT is its speed. I had a reply in seconds. It suggested starting with a spread of FTSE 100 blue-chips, led by Legal & General Group as an insurer with an attractive dividend record. It also highlighted Barclays as a bank with a relatively low valuation, steady payouts and strong recent share price momentum.
Blue-chip picks
ChatGPT then pointed to National Grid and Unilever as stocks that can bring some defensive stability in volatile times. After that it moved into funds, recommending a global tracker for US exposure and an emerging markets tracker. ChatGPT said this would provide balance through different market conditions, although it didn’t name any specific trackers. Mind you, I didn’t ask.
Some of this made sense, but the gaps soon showed. It didn’t flag that Legal & General Group shares have been stuck for years. The trailing yield, close to 9%, looks generous, but that’s largely because the share price has gone nowhere. I think the dividend is safe, but there are no guarantees and ChatGPT didn’t mention any risks.
Barclays was sold short too. ChatGPT didn’t mention that the shares are up a mighty 60% over the last year and more than 200% over five years. Investors should do proper research rather than relying on a machine summary.
Diageo was a surprise choice
Things got stranger when I asked for one standout stock. I didn’t expect it to pick spirits maker Diageo (LSE: DGE). It praised its array of global brands such as Guinness, Baileys, Smirnoff and Tanqueray, arguing this gives it pricing power and reach. Fair enough. It also said the shares have had a tougher spell, citing changing habits and weaker sales in parts of the world, though without any detail.
It didn’t mention how bad things have got. The Diageo share price has plunged a massive 25% over 12 months and 50% over three years. That’s a disaster for existing shareholders, although could be a buying opportunity for others. Provided they understand the risks.
ChatGPT then claimed the trading yield sits around 2.7%. That isn’t correct. It’s almost 4.5% today. The misfiring chatbot also claimed Diageo shares trade on a price-to-earnings ratio near 20. Not any longer. The P/E has plunged to just 14.4. Which does have the benefit of making it cheaper than ChatGPT suggests.
However, it didn’t mention serious long-term risks, such as cash-strapped drinkers trading down to cheaper brands or younger people taking a more cautious view of alcohol.
ChatGPT ended with generalities, saying that building wealth inside a Stocks and Shares ISA takes patience and long-term discipline. That’s true. But it also takes accurate research, reliable figures and a wider picture. AI doesn’t do that. To be fair, that’s not what it’s designed for.
The biggest lesson I’ve learned here is that investing requires the human touch.
