How To Use AI As Your Investing Cheat Code

Strengthening Your Investments With AI

Call me crazy, but I use AI to help me with almost ANYTHING.

Birthday gift ideas, how to save money on a new roof, swim workouts, recipes, how to train my cat to do my bidding, etc.

But did you know it can also help make you money?

If you haven’t been using AI to help you make more money, then this might be the most important issue of Big Money Methods for you yet. 

Here’s how to leverage the vast computing power of AI to practically hack your way to becoming a professional investor in the stock market.

Harnessing AI for Financial Information:

If you are investing, you are probably interested in knowing whether a stock is overvalued or undervalued. If you know a stock is undervalued, that means the stock has more room to run in your favor. If a stock is overvalued, it may still go higher in the short term, but longer term has the potential to lose you money.

Instead of relying on your gut feeling, anecdotal experience, or emotions about the company why not enlist the help of AI?

With the assistance of AI tools like chat GPT, you can have AI do the research for you.

You first want to ask it some baseline questions, like:
“What are important metrics regarding a stock’s fundamentals?”

You may get an answer like P/E ratio, ESP (earnings per share), dividend yield, debt to equity ratio, and more.

From there, you can ask chat gpt about each individual metric. What’s cool about using AI is that you can ask AI to explain complex topics in simple ways.

You could also ask Chat GPT: “Explain P/E ratio in a simple way.”

You will get an answer like: The price-to-earnings (P/E) ratio is a measure used to evaluate a company's current stock price relative to its earnings per share (EPS).

After that, you can work with AI to get a better understanding of what is considered “high” or “low”. Generally, a PE over 25 is considered high. If a PE is over 25, it means investors are paying a large premium for future earnings and growth potential. If a PE is under 10, it may mean that investors are ignoring a potentially undervalued stock.

Certain sectors like technology and consumer discretionary can have higher than normal PE ratios. Think Apple, Amazon, Google, and Meta. Investors are willing to pay a premium to own these stocks, because their earning potential is nearly unlimited. Remember that they are using AI too! Let’s join them.

You can swiftly analyze fundamental metrics such as Price-to-Earnings (PE) ratio, Intrinsic Value, and Margin of Safety (MOS). It's like having a team of financial experts at your fingertips. They do all the legwork for you.

Have AI Evaluate Your Current Portfolio:

Here is a prompt I just used: evaluate my portfolio. I will list the ticker and percentage of my portfolio. Please note this is only half my portfolio.

• WM 2%

• RKT 1/2%

• BRK/B 4%

• NVDA  7.2%

• SPY 5%

• VCSH 10%

• QYLD 5%

• AMZN 2%

• BITO 3%

• CALM 3%

• XLV 4%

• USOI 4%

• ORCL 2%

• MCD 2%

• XLE 2%

Based on the provided ticker symbols and their respective percentages in your portfolio, here's an evaluation:

• WM (Waste Management): 2% - Waste Management is a stable company in the waste management industry, known for its consistent performance and dividend payments. It provides essential services, which can offer stability to your portfolio.

• RKT (Rocket Companies): 0.5% - Rocket Companies operates in the financial services sector, primarily focusing on mortgage lending. It has shown volatility in the past, influenced by interest rates and the housing market.

• BRK/B (Berkshire Hathaway): 4% - Berkshire Hathaway, led by Warren Buffett, is a conglomerate with diverse holdings across various industries. It's often considered a stable long-term investment due to Buffett's value investing approach and the company's solid financials.

• NVDA (NVIDIA Corporation): 7.2% - NVIDIA is a leading technology company specializing in graphics processing units (GPUs) and artificial intelligence (AI). It has shown strong growth potential, driven by the increasing demand for GPUs in gaming, data centers, and AI applications.

• SPY (SPDR S&P 500 ETF Trust): 5% - SPY is an exchange-traded fund (ETF) that tracks the performance of the S&P 500 index, providing diversified exposure to the overall U.S. stock market.

• VCSH (Vanguard Short-Term Corporate Bond ETF): 10% - VCSH is an ETF that invests in short-term investment-grade corporate bonds, offering relatively low risk and steady income compared to stocks.

• QYLD (Global X NASDAQ 100 Covered Call ETF): 5% - QYLD is an ETF that employs a covered call strategy on the NASDAQ 100 index, aiming to generate income from options premiums. It can provide enhanced yield but may sacrifice some capital appreciation potential.

• AMZN (Amazon.com Inc.): 2% - Amazon is a leading e-commerce and cloud computing company with a history of strong growth and innovation. It's considered a growth stock, but its valuation and regulatory risks should be considered.

• BITO (ProShares Bitcoin Strategy ETF): 3% - BITO is an ETF that aims to track the performance of Bitcoin futures contracts. It provides exposure to cryptocurrency markets but carries high volatility and regulatory uncertainties.

• CALM (Cal-Maine Foods Inc.): 3% - Cal-Maine Foods is the largest producer and distributor of eggs in the United States. It operates in the consumer staples sector, offering stability and potential dividend income.

• XLV (Health Care Select Sector SPDR Fund): 4% - XLV is an ETF that invests in healthcare companies included in the S&P 500 index. It provides exposure to a defensive sector with long-term growth potential.

• USOI (Credit Suisse X-Links Crude Oil Shares Covered Call ETN): 4% - USOI is an exchange-traded note (ETN) that tracks the performance of crude oil futures contracts and employs a covered call strategy. It can provide exposure to the energy sector and yield from options premiums.

• ORCL (Oracle Corporation): 2% - Oracle is a multinational technology company specializing in cloud computing and enterprise software. It's considered a mature tech company with a focus on recurring revenue from software licenses and cloud services.

• MCD (McDonald's Corporation): 2% - McDonald's is a global fast-food restaurant chain known for its strong brand and consistent dividend payments. It operates in the consumer discretionary sector and offers stability in uncertain market conditions.

• XLE (Energy Select Sector SPDR Fund): 2% - XLE is an ETF that tracks the performance of energy companies in the S&P 500 index. It provides exposure to the energy sector, which can be influenced by factors like oil prices and geopolitical events.

How To Get The Best Result Possible

Want the best answer possible?

Give the AI as much information as possible.

Chat GPT is not going to go above and beyond unless you tell it to. It’s like an employee that will strictly do what they’re told, not more or less.

Some parameters you can tell Chat GPT:

1. risk tolerance: Ex. “I am only willing to lose up to 30% of my wealth in a given year”
2. time horizon: Ex “I am investing with a time horizon of more than 10 years.”
3. age, net worth, other assets: Ex “I am 25 years old, have a $200,000 net worth, and I own a home”
4. Any and all relevant information

AI needs to be trained. The more details you provide, the better it can help you. It’s called personal finance for a reason. And while this is fine and dandy, it’s important to understand the pitfalls of AI…

The BMM Takeaway

AI is not perfect.

It’s important to note that you should not be taking investment advice from AI itself. It can be inaccurate if you are asking for an opinion. It can also be inaccurate if you ask if a certain stock or asset class is “risky” or not.

If you use the bing version of chat gpt to browse the internet, just know that some of the information may be incorrect. You should seek an investment professional to properly assess your investments, risk tolerance, and goals. While Chat GPT is very helpful for simple questions and tasks, you especially want to be careful if you are asking complex questions.

I like to use Yahoo Finance to verify chat GPT. I will go to Yahoo Finance.com, type in the stock, click on statistics. If it matches with Chat GPT, great! If not, be sure to conduct more research.

It's important to note that AI doesn't make predictions about the market and it doesn't give any recommendations for stocks to buy. It’s my job as a market technician to find the stocks that are in rotation, manage investments, and balance risk.

When in doubt, seek professional advice. Financial advisors are like the Yodas of the investment world – wise, experienced, and ready to guide you through the ups and downs of the market. So don't hesitate to reach out to Yoda, like Luke did. This is critical to master the force (or in this case the markets)!

Disclaimer: The information contained in this article is not intended and shall not be understood or construed as financial advice. The team at Big Money Methods have done our best to ensure the information provided in our articles is accurate and valuable information. Regardless of anything to the contrary, nothing through this website should be understood as recommendation that you should not consult with a financial professional to address your particular information.