I Asked ChatGPT How To Invest Like a Rich Person: Here's What It Said

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2 days ago

Many folks are beginning to use ChatGPT instead of Google when looking for information. They're switching because ChatGPT is quicker and more specific. People are also using ChatGPT for financial assistance and even personal financial analysis. Is this a good idea? We wouldn't go that far but it can be a good starting point.
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GOBankingRates put the generative AI chatbot to the test, asking how to invest like a rich person. Here's what ChatGPT said in response.
The first tip the chatbot shared is to think long term. This is really the only smart way to approach investing and is heavily recommended by the best investors, including Warren Buffett. ChatGPT posted the following points here.
Prioritize capital preservation and steady growth.
Embrace long-term investing horizons.
Let compound interest work for decades.
These are all astute points, but ChatGPT doesn't get deep with them. It should at least, however briefly, discuss what compound interest is, as that's the key benefit of a long-term investing strategy.
The Consumer Financial Protection Bureau defines compound interest as 'when you earn interest on the money you've saved and on the interest you earn along the way.' For a more human-sounding explanation, consider Buffett's analogy. He likens compound interest to a snowball rolling down a long hill, collecting more snow as it picks up speed, eventually becoming a massive snowball. Your investment is the snowball, and time is the hill.
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Another salient tip from ChatGPT: Diversify strategically. Rich people swear by investing across numerous categories, including:
Stocks and bonds
Private equity and venture capital
Real estate
Alternative assets like crypto
This is all accurate, but there's more to strategic diversification. You should know the purpose of this and why it's important. Diversification reduces your risk should a stock (or the market at large) tank. Nothing eliminates risk in the investing world, but diversification is the tool to manage it.
Here's another principle that Buffett insists on implementing in your investment strategy. Invest in what you understand. Never buy stock solely because you hear it's hot right now or because you believe in the company behind it. The latter is important, but research is more important.
ChatGPT highlighted the following instructions.
Invest in sectors they know well (e.g., tech, real estate, private equity).
Do deep due diligence before investing.
But there's a bit more to this advice. Investing in what you know is not a one-time deal. Throughout your investment journey, you should be keeping in the know of what's happening behind the scenes of your investments. For example, if a company you're heavily backing is experiencing calamity in its leadership, be aware of that. This doesn't mean you should bail, but you do want to have your finger on the pulse, always.
Yes, ChatGPT, this is a really important point. If you want to invest like a rich person, you need to be taking full advantage of tax-advantaged accounts, including the following:
IRAs
401(k) plans
HSAs
Trusts
LLCs
Ultra-wealthy people usually own assets such as real estate or businesses that generate passive income. ChatGPT highlighted the importance of owning assets if you want to invest like a rich person.
ChatGPT instructed readers to be strategic with debt, saying, 'Use good debt to invest (e.g., mortgages, business loans); avoid high-interest consumer debt.'
The second point is nonnegotiable. Carrying high-interest debt is a major no-no no matter your desired wealth status. But the first part, about using 'good debt' to invest is controversial advice. We mustn't assume any mortgage or business loan debt is 'good.' All debt carries risk and can become 'bad,' so you need to work with a financial advisor to build a plan where debt works in your favor.
Right on time, ChatGPT provided this tip: 'Use financial planners, tax advisors, lawyers and estate planners,' the chatbot said. You 100% need to do this. We often read this as the last tip, but it probably should be the first one, if you really want to invest like a rich person.
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This article originally appeared on GOBankingRates.com: I Asked ChatGPT How To Invest Like a Rich Person: Here's What It Said
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