Latest news with #ErikSmolinski
Business Insider
11-08-2025
- Business
- Business Insider
Are you getting bad investment advice from AI? Experts explain how to tell.
It's hardly news that people are finding ways to use AI to make investment decisions, but there are risks to depending on a chatbot to tell you have to put your money to work. Trading and investment forums like Reddit's Wall Street Bets are rife with stories of investors claiming ChatGPT helped them become better trader. Indeed, there are some good uses for the tool. "AI can literally do everything that it took me six years to learn," the trader Erik Smolinski said, adding that he primarily uses it for data and analysis, specifically slicing through complex data. But are stories like his the norm, and what are the risks of using AI to tell you how to invest? Business Insider asked a few finance pros for best practices if you want to leverage AI-generated advice. Take AI trading advice at your own risk Confirmation bias is a significant concern when investors ask AI models for trading advice, particularly with regards to emerging companies, as there may be less information about them available. "In my experience, LLMs often pull from a small, self-reinforcing pool of sources when analyzing early-stage or niche projects," said Markus Levin, cofounder of blockchain firm XYO. "That usually means company press releases, founder posts on X, Reddit threads, and carefully managed media appearances." Levin said that while proprietary models used by trading firms can generate high rates of success, they are different from what's available to retail investors. "They're asking public LLMs questions like, 'what project will 5-10x this year?' and treating the responses as investment insight. That's where the real risk lies," he added. Eric Croak, president of Croak Capital, was more blunt about his view of AI-generated advice, describing it as "algorithm-assisted gambling." "I believe what makes AI dangerous with crypto and options specifically is its inability to explain asymmetric risk in real terms," he said, noting that these bots can easily omit important factors such as tax consequences or liquidity concerns. Croak isn't the only expert who sees high risk in allowing AI bots to make trading decisions. "The AI tools have zero accountability to a board or the law, so users beware," said personal finance coach and educator Linda Ta Yonemoto. "AI advice that leads to tax penalties or investment losses means you're on your own." Red flags to look for when seeking advice So what kind of behavior or response from a chatbot might be a sign it's giving you bad advice? "I would argue that the biggest red flag is any AI pitch that sounds clean, packaged, or confident without citing exact numbers, timeframes, or dates," said Croak. "If it reads like a marketing blog instead of an investment memo, that is your warning." He highlighted the danger of generalized recommendations. Tim Newell, founder and CEO of personal finance platform GreenFi, echoed that sentiment. "The biggest red flag is advice that's too general. Good financial advice, from a person or AI, always starts by understanding your unique situation and goals, rather than offering one-size-fits-all answers," he stated. Jake Falcon, founder and CEO of Falcon Wealth Advisors, said that if a chatbot appears overconfident in its predictions, a common trait in many AI models, that should be a warning for investors. He added that investors should also watch for a lack of attribution when a bot provides information. "Reliable advice should include context, limitations, and risk disclosures. Many AI outputs skip this entirely," he said.
Business Insider
13-05-2025
- Business
- Business Insider
A financially independent trader who's returned 33% in 2025 says right now is a 'massive opportunity for investors'
As an options trader, Erik Smolinski thrives in chaotic markets. "In the options-trading world, what you need is not necessarily persistent, directional moves like most standard buy-and-hold portfolios might," he told Business Insider in May 2025. "What you need is volatility, which is what we've got in spades." Smolinski has been trading since 2007, when he was still in high school. He's only posted two negative years — his first two years — and has consistently beaten the S&P 500 ever since. Between 2018 and 2022, he returned 24.6% on average, which BI verified by looking at screenshots of his summary statements. The S&P 500 averaged nearly 12% over the same period. As of April 2025, he had returned 33% for the year and outperformed all but four years in his 18-year trading career. The S&P 500 fell 6% over the same timeframe in 2025. "This whole market has been such a joy to trade," he said. "Institutions don't know what's going on any better than retail traders because it's all a crap shoot. You don't know what's coming out on the next tweet or Truth Social. It is straight madness, but it is a trader's dream and a massive opportunity for investors because this kind of dislocation levels the playing field for everybody." By one measure, the economy has not been this unpredictable in many decades. The Economic Policy Uncertainty Index, which tracks how frequently newspapers write about the economy, policy, and uncertainty, spiked in April to the highest level since recordkeeping began in 1985. Still, Smolinski hasn't made any drastic changes to his strategy in 2025. After all, he attributes his general success trading to having a detailed plan and sticking to it. "I don't chase topline performance. I wholly focus on process," he said. "That means that as I'm executing what I'm doing as a trader, there's no going off script and saying, 'Oh, I feel like this is going to happen, so I'm going to react this way.' I don't care how I feel. What I care about is what makes sense and sticking to that process." That doesn't mean he never shifts his strategy. He does weekly and monthly AARs — "after action reviews," a concept he picked up whiles serving in the Marine Corps — and uses that time to ask himself, "what's working?" and, "what's not working?" How the everyday investor can capitalize in 2025 Smolinski recognizes that, as an investor, he's more active than most. For the everyday investor looking to capitalize on what he believes to be a "massive opportunity," he first advises setting aside cash. This is separate from your emergency fund, which should be built out before you start investing, and specifically "to be able to gain exposure quickly to opportunities as they begin to hit prices that the investor likes," he said. Next, create a "watch list" of potential investments to jump on. If you're not sure where to start, ask yourself a few broad questions. For example, "Do you think technology is going to be bigger, more profitable, more dominant five years from now?" he said. "I feel pretty confident on the yes, personally. So, one of the simple things a retail trader could do is start at the very high level and start dollar cost averaging into QQQ, which is the Nasdaq 100 Index ETF. It's still bundled into an index ETF, it still keeps your money inherently diversified in one low-cost index fund, but it's a little bit concentrated into tech." Another broad category he considers is healthcare. "Think about what kind of impact something like AI can have in that sort of industry, everything from diagnostics to records-keeping to patient management," he said, adding that there are index ETFs that track the medical field. Those types of ETFs may go into your "core bucket" of investments, he said, which should be lower risk and focused on long-term growth. If you have extra money to invest, you can consider adding a "speculative bucket" to your portfolio. When considering more speculative investments, Smolinski said there are two broad directions you could go in. One, you could consider policy-driven impacts, and industries and businesses that are likely to benefit under the current administration over the next two to four years. Two, you could think longer-term, beyond the current administration, about "industry-level revolutions and what companies are positioning themselves well," he said, giving Palantir as an example. "Palantir started as mostly a government-facing AI contractor, but now they're spreading massively into the commercial industry." Use your intuition by asking yourself: "Do I think this could be bigger in the future, and why? If you can answer why with a decent reason, you're probably onto something," he said. You can also use an AI chatbot like ChatGPT to help you brainstorm by feeding it a prompt such as, "What kind of industries are likely to benefit the most, and what are publicly traded companies within those industries that are most likely to benefit?" he said. "Boom. It gives you all the research. Then, use it for follow-up questions to really help solidify your understanding of things." For the passive investor who wants to set and forget their portfolio and is less interested in having a speculative bucket, "it's very much about consistency," said Smolinski. Don't let recession chatter or market swings cause you to pull out of the market or avoid investing in the first place. "There's always something going on. Always. It's humanity. So, if you use the excuse of, 'blank is going on,' guess what? Something is always going on. It means you will do nothing," he said. "So much more money is lost by leaving it to sit and decay from inflation, chewing your lunch, and waiting for some sort of drop to put your money in. Simply start and don't stop."
Business Insider
09-05-2025
- Business
- Business Insider
A financially independent trader who spends about $200 a month on AI tools like ChatGPT explains why they're worth it
Erik Smolinski doesn't know exactly how much he pays to use AI chatbots like ChatGPT. "I don't even know what I spend on it a year, to be honest," the financially independent options trader told Business Insider. "I would guess maybe two grand between all the models." While free versions of AI models exist, he'll gladly pay for a premium experience. Subscription-based models are common — ChatGPT, for example, has a $ 20-a-month "plus" version and a $ 200-a-month "pro" version — but there are also consumption-based models where you pay per text or audio request and project-based fees. "It will literally save you so much more than that, just in the function of time, let alone what else it can do," he said, adding that he expects to pay much more for the service in the future. "I would be honestly shocked if they keep it priced this cheap. With the kind of value it can provide, man, they can charge so much if they wanted." Smolinski pays for a handful of models, including ChatGPT, Gemini, Llama, DeepSeek, Perplexity, and Grok. "Different models have different personalities," he said. Plus, testing out a variety of products is a way for him to keep his finger on the pulse. "Part of it is also just to understand how it's evolving, how it's changing, and who's leading — because all different companies run these different models." Right now, for his purposes, he prefers Grok. "It has been incredible, especially from an investor trader perspective," he said. For the everyday investor, "I would probably go with ChatGPT. It's steady, consistent." Using AI as an investor Smolinski isn't your average investor. He's an active trader with a detailed trading plan — a nearly 400-page document broken out into various sections — that is constantly evolving based on his trading log, which is where he collects data and records outcomes after testing various scenarios. He uses AI daily to assist his trading career and answer general questions that arise throughout his day. He even used it to plan a detailed itinerary for his and his wife's most recent trip to Ireland. "From an investing perspective, I mostly use it to help me with data analysis," he said. "I use it to help me think of different ways to slice and view my data — and I have a stats background from my undergrad and grad degree. AI can literally do everything that it took me six years to learn." It's helped him refine and analyze his trading log. "It can help you think about different ways to track what you're looking at — different ways to visualize it — to help you come up with different ideas," he said. If you have a trade log, "you can feed it the Excel version of your brokerage statements, so you can pull out all your personal information and it can just be your trades, and you can just be like, 'Analyze this. What trends do you see?'" He said he's particularly impressed with the deep research function that some of the models offer: "It'll conduct this really rigorous, deep research and provide citations for everything." The average passive investor should also be taking advantage of AI. Start by asking ChatGPT or your AI of choice something like: "I have $5,000. I want to grow my money over the next 25 years. Give me some ideas on how I can build a portfolio," he advised. "It can literally help accelerate all of your decision-making." From there, you can build on complexity. Perhaps you want to find ways to capitalize on the current policy shifts in the US under the new president. Give your AI chatbot a specific prompt, such as, "What kind of industries are likely to benefit the most, and what are publicly traded companies within those industries that are most likely to benefit?" he said. "Boom. It gives you all the research. Then, use it for follow-up questions to really help solidify your understanding of things." Regardless of where you're at in your career or investing journey, Smolinski advises leaning into AI. "If you're not using AI, you are already falling behind," he said. "It's such an accelerator." And, for him, it'll always be worth the price: "I don't even know how you could justify not spending the money on it. I really don't."
