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AI financial advice is surprisingly good, especially if you ask right questions

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Re: AI financial advice is surprisingly good, especially if you ask right questions

#171

Post by HWR_14 »

what wrote: post #164
AussieWog93 wrote: post #98

People in this thread are massively underestimating the level of financial illiteracy in the general population. We've had multiple people try to convince us to set up bank accounts for our kids, so that they could accumulate interest over 18 years. More that tried to convince me to gamble on random pump and dump shitcoins. More still that talked about "investing" in random collectables like Funko Pops or Pokemon car…

> We've had multiple people try to convince us to set up bank accounts for our kids, so that they could accumulate interest over 18 years. I don’t really see the problem here? Why wouldn’t you want to set up financial accounts for your children and invest in them?

Those accounts should be in something that pays more interest because you give up the liquidity. You pay (in reduced interest rates) for the ability to withdraw at any time. You can instead be completely risk free and make more money* by promising not to need it for another 10, 14 or 18 years.

* However many of those methods involve locking in the interest rate, so you might miss out if banks start paying 10% like they did decades ago.

Re: AI financial advice is surprisingly good, especially if you ask right questions

#172

Post by blharr »

mjr00 wrote: post #37
aprilthird2021 wrote: post #24

Earlier quoted context omitted.

> By comparison, financial advice is pretty simple, and there is a universally agreed-upon approach that most people should follow to maximize long-term financial health. What will AI do when those rules, which it's trained on their repetition so much, don't apply anymore? ~8% annual stock gains for the next 40 years may not hold and an 80/20 stock/bond ratio may not be as wise in upcoming decades

Stock/bond ratios are way too advanced for what's qualifying as good advice here: > AI consistently advised people to save during their working years, draw down savings in retirement, invest heavily in diversified stock funds, and reduce stock exposure after age 45. This is analogous to saying to an aspiring software developer, "You should write clean and testable code, have clearly defined API boundaries, and a repe…

And similar to the low quality of developers...

If you are even thinking about writing clean and testable code, having clearly defined API boundaries, and keeping a repeatable build process, you are probably already significantly above average.

If you are even trying to save, invest diversified, and manage risk as you age... you're probably doing better than like 80% of your peers financially

Re: AI financial advice is surprisingly good, especially if you ask right questions

#173

Post by Aachen »

hn_throwaway_99 wrote: post #160
AussieWog93 wrote: post #98

People in this thread are massively underestimating the level of financial illiteracy in the general population. We've had multiple people try to convince us to set up bank accounts for our kids, so that they could accumulate interest over 18 years. More that tried to convince me to gamble on random pump and dump shitcoins. More still that talked about "investing" in random collectables like Funko Pops or Pokemon car…

While I agree with you about the level of financial illiteracy in the general population, I don't really see what AI has to add for the vast majority of the population is simple. Basic financial advice is not hard (save regularly, invest in low cost index funds, don't take on CC debt, etc.), but a lot of it goes against most human nature, especially around delayed gratification. People have known for decades that "di…

> I don't really see what AI has to add for the vast majority of the population

What it does best: sound plausible and never tire of a personal (sounding) conversation

An early study (with one of the early versions of ChatGPT) showed that people also come away less convicted about extreme political notions whereas chatting with a human had no or a slight solidifying effect. It's apparently an amazing tool to convince people of reasonable stuff (and probably also unreasonable stuff, if you'd make it, but I guess those proposals didn't pass the ethics committee!). There's loads of Financial cooks out there that'll convince you of golden mountains for anything that gives them a cut, kickback, or straight-out all of your money, so I could even see the reasoning in encouraging people to chat with just about any chatbot about their financial decisions

My main concern is the reliability: while it may be feel-good to say that it can prevent, say, 95% of scams and 80% of bad ideas, any time it fails at its job will actively steer someone towards ruining their life. Effort might be better spent on something that reliably works. So I'm not convinced either way yet, just that I could see how this is more convincing (and thus effective, at least in aggregate) than a napkin with legit useful commandments (at least for the USA; idk if we have such a thing as 402(K) here)

Re: AI financial advice is surprisingly good, especially if you ask right questions

#175

Post by jeffreyrogers »

what wrote: post #168
jeffreyrogers wrote: post #156

Earlier quoted context omitted.

Roth contributions are withdrawable without penalty. Also most employers offer a match of some amount, which is essentially free money.

Most people here are probably paid too much to contribute to a Roth IRA.

You can convert your 401k to an IRA when you leave an employer. Some employers also offer in service rollovers (I think these mostly have minimum age restrictions on them though)

Re: AI financial advice is surprisingly good, especially if you ask right questions

#176

Post by foxtrot8672 »

paulpauper wrote: post #9

AI financial advice encourages people to save more, diversify their investing, and take on less risk as they age. sounds like pretty generic advice. I thought they meant it gives good stock picks or trading strategies. That would be noteworthy. This is just "meh".

well, we find a material difference when using defined inputs to constrain and optimize agent responses. For example, there are some things that a generic ai couldn't do well out of the box, but is essential to long term household stability: constant monitoring, financial synchronization, and deterministic calculators and data retrieval subsystems. mostly, memory, of users' decision points and financial history. memories are built over time and far outlive a generic AI's chat context.

Re: AI financial advice is surprisingly good, especially if you ask right questions

#177

Post by [deleted] »

Eji1700 wrote: post #109
AussieWog93 wrote: post #98

People in this thread are massively underestimating the level of financial illiteracy in the general population. We've had multiple people try to convince us to set up bank accounts for our kids, so that they could accumulate interest over 18 years. More that tried to convince me to gamble on random pump and dump shitcoins. More still that talked about "investing" in random collectables like Funko Pops or Pokemon car…

“Pay your bills on time and fully” “Do what you can to eliminate addictive vices or never get them” “Max your Roth and 401k contributions before even thinking about anything else” “Try to budget” “Don’t live beyond your means. Monthly payment need to be considered carefully” If you can even TRY to do these things it puts you SO far ahead of the average person. It sucks because I get it, if you’re behind waiting years…

[deleted]

Re: AI financial advice is surprisingly good, especially if you ask right questions

#178

Post by nsvd2 »

kristianp wrote: post #136
AussieWog93 wrote: post #98

People in this thread are massively underestimating the level of financial illiteracy in the general population. We've had multiple people try to convince us to set up bank accounts for our kids, so that they could accumulate interest over 18 years. More that tried to convince me to gamble on random pump and dump shitcoins. More still that talked about "investing" in random collectables like Funko Pops or Pokemon car…

We have bank accounts for our kids, currently earning 1.75% because we aren't depositing money every month. If money is deposited it's another 3.3%. I really need to get around to setting up Vanguard for them. Thanks for the reminder!

1.75 is less than the money is losing value from inflation. If that savings is in USD it's quite a bit less than inflation over the past five years.

Re: AI financial advice is surprisingly good, especially if you ask right questions

#179

Post by dripdry45 »

jeffreyrogers wrote: post #156
scrapcode wrote: post #152

Earlier quoted context omitted.

I never personally liked the blanket advice to "Max your 401k." For most, if achievable at all, that would be the most they can invest at all. Even though it is often recommended alongside a proper "emergency fund," that advice leaves little liquidity without major penalties.

Roth contributions are withdrawable without penalty. Also most employers offer a match of some amount, which is essentially free money.

The five-year clock is for the original contribution. It’s important not to get that mixed up.

Re: AI financial advice is surprisingly good, especially if you ask right questions

#180

Post by nsvd2 »

MBCook wrote: post #125
AussieWog93 wrote: post #111

Earlier quoted context omitted.

The banks might pay 3% interest, whereas even non-volatile conservative investments like cap notes or bonds would pay something like 7%. Plugging it into a calculator: 1.03 ^ 18 = 1.70 1.07 ^ 18 = 3.37 Example numbers, but you're effectively taking half of the money that your kid would have had on their 18th birthday, and giving it to a banker.

3% is amazingly good. It’s not hard to beat that, but a savings account at a common bank can easily be below 0.05%. I looked up BoA. 0.04%.

3% is typical for a HYSA (Ally, for example)
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