A while ago, I was speaking with a financial advisor, and the conversation shifted towards the use of AI in personal finance. He believed that those who see the help of AI are not really DIY investors. Does this make sense?
Like most things in life, “it depends” on how we use AI. First, let us “define” who a DIY investor is. IMO, a DIY investor is someone who takes investment decisions on their own. That is, they first understand their needs, research products and solutions suitable for such needs, and then make the choice. Someone who constantly seeks validation from other members in a community is not a DIY investor IMO.
The level of introspection required to understand their needs and the depth of research are key. Even before the advent of AI, very few “DIY” investors did this right. AI may have made the research easier, but results largely depend on what we ask and our expertise in interpreting results. Sadly, neither of these can be obtained by chatting with AI bots.
Surely there is a big difference between the investor who asks the AI engine to “teach me to analyse mutual funds” and the investor who wants a list of the best-performing mutual funds or “help me plan for retirement” without any insight on inputs and assumptions.
DIY investing is all about clarity and confidence. Someone who quickly wants a list of products to invest in is unlikely to have both, in my experience.
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Those who wish to utilise AI as a research assistant must first understand the research process. For example, it is immature to ask AI, “Which funds did well over the last 5 years?”. Yes, you will get a factual answer, but that is of no use unless the user truly understands the past performance disclaimer.
We must also appreciate that DIY investing is a journey. Making poor or sub-optimal investment decisions is natural in the early stages. We learn either by experience or by examining past risk. AI can help with the latter, provided we know how to extract and appreciate the information.
Unless you are in a position to appreciate the limitations of an AI answer quickly, you are better off taking the trouble to read the source articles linked in the answer. Most users are unlikely to do this.
The more important question is, has AI made things worse? Probably not. Even before AI, Google captured the sentences relevant to our search query and showed them to us. Many of us didn’t bother clicking on the article to investigate further.
Even before the advent of AI, “DIY investors” were typically not rigorous in their research and lacked confidence in their choices. AI has accelerated the process of making poor decisions for most people.
So, are you really a DIY investor if you ask AI for help? There is nothing wrong with using AI for DIY investing. It is inevitable. But whether you are a true DIY investor or not depends on how much you are willing to dig deeper. It is, however, a journey. Over time, we will come to realise that simpler choices are better and that there are multiple solutions to every problem. This wisdom will refine our expectations of an AI assistant.
We recommend that investors start with basic and trusted resources and books. Learn the ropes and then graduate to AI assistance (if necessary).