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

mitsloan.mit.edu

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

#241

Post by Cider9986 »

What's the best place to put money for my 6 year old son or best strategy to follow?

ChatGPT:

529 college savings or custodial brokerage or custodial Roth IRA.

80-100% diversified in us. Optionally adds international.

Advertisement:

>SoFi Online Savings Account Better Banking is Here To Stay. Up to 3.10% APY and No Account Fees. Terms apply.

GLM 4.7:

529 / Roth IRA / UGMA

broad, low-cost index funds for example VTI.

claude-opus-4-7-thinking

Similar to GLM for accounts.

Didn't mention what to invest in, said chores can be used in Roth IRA (false).

Only one to give a disclaimer about financial advice.

claude-opus-4-8:

Similar accounts, wants to narrow it down based on additional response. Also no investment advice.

claude-opus-5-max:

Noted that you should invest aggressively(good idea).

Differentiated college and life at the start (good).

Notes downsides for custodial account for financial aid.

Automation recommended (very good).

Low fees recommended(good)

>broad, low-cost stock index fund

Good but pointing something specific would be better imo.

Fable 5:

Similar, mentions s&p.

Less detailed.

Conclusion:

I would say Opus 5 is the best advice but all are better than average. I would have liked more focus in the human element, avoiding panicking. And what exactly to buy (specific tickers of low cost ETFs or something).

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

#243

Post by toast0 »

kshacker wrote: post #233
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.

I am curious. When you put this money in kids names, do they (or we) get taxed on this? If we save on taxes, then for a person (or their child) with high income and high state taxes, the benefit of the 3% may be larger than it appears to be. Of course, up to a limit.

Depends on jurisdiction, I'm sure.

In the US, kids taxes can be separate, but after a small exemption, they pay the parents rate on unearned income (investments, interest, etc). You have to have a pretty big balance before 3% apy gets past the exemption though.

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

#244

Post by dingaling »

throw0101a wrote: post #161
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…

> You could replace the AI with a piece of paper […] This is actually the 'schtick' of a book that was written ten years ago: > Emails and comments on his blog asked for a real index card with financial advice, so Pollack jotted down nine rules in two minutes, took a picture of it, and posted it online.[1][4] The image went viral, and was covered on many internet news sites.[4][5][6] Pollack and Olen wrote The Index…

Sadly, also hyper-unrealistic. Very few people can afford to save 20% of their income whilst maxing pension contributions, let alone maximising other accounts.

Points 1, 3 and 5 are probably the key ones and would still stretch most people.

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

#245

Post by Gigachad »

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…

I've been using LLMs as a rubber duck for scenarios, and I've found they just agree with whatever the last thing you said was unless its blatantly wrong. They will happily 180 the opinion to match the last message, never ask further questions, never push back unless you've said something totally factually incorrect.

So I agree with the title. If you already know the answer, LLMs can read it back to you.

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

#246

Post by oezi »

calmbonsai wrote: post #66

AI, atm, is a perfect distillation of financial platitudes from ~10 years ago. FWIW, bonds are no longer a hedge against equity unless they’re based against private equity and private equity is both more expensive and more performant than ever.

Yes, the preference for bonds seems deeply ingrained. Have you found a way to steer LLMs away from old school allocation (bonds, gold, cash)?

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

#247

Post by Gigachad »

jghn wrote: post #211
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…

It's easy to see why it works though. I know people like this who have made bank with these stupid schemes. Far higher returns than doing things the "right" way. The problem is you usually only hear from folks like this who are up a gajillion percent on some dumb crypto play, and not from the people who just wasted their life savings.

You only ever hear about this stuff while it's up. The NFT bros have been quite for a long time now.

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

#248

Post by jandrewrogers »

nunez wrote: post #230
groundzeros2015 wrote: post #150

Earlier quoted context omitted.

Index funds are not risk free! We have had a solid 15 years and everyone forgot that there are decades of declines or stagnation.

That's why you hedge with Bogleheads three headed fund. Bonds are strong when the indexes are weak according to them

The anti-correlation between bonds and equities hasn’t been a thing for decades. That is advice that passed its sell-by date a while ago.

The modern version is to go hard into equities and out-grow the drawdown risks. You still want a couple years of burn in treasuries but that is strictly a buffer against adverse returns. By the time you retire, the treasury fraction is a tiny fraction of the total by virtue of the equity growth rate.

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

#249

Post by Eji1700 »

throw0101a wrote: post #170
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.

> I never personally liked the blanket advice to "Max your 401k." I think the general advice is max out employer contributions to your 401(k) * https://old.reddit.com/r/personalfinance/wiki/commontopics * https://old.reddit.com/r/PersonalFinanceCanada/wiki/money-st...

Yeah to be clear that's what I meant. Contributions beyond that depend on your situation, but if you can match your employer your should.

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

#250

Post by ButlerianJihad »

Gigachad wrote: post #245
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…

I've been using LLMs as a rubber duck for scenarios, and I've found they just agree with whatever the last thing you said was unless its blatantly wrong. They will happily 180 the opinion to match the last message, never ask further questions, never push back unless you've said something totally factually incorrect. So I agree with the title. If you already know the answer, LLMs can read it back to you.

Are you referring to https://en.wikipedia.org/wiki/Rubber_duck_debugging
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