Allianz Guru Series by Henry Yang: Sound Financial Tips from an AI Chatbot

The future is here. We are now in an age where Artificial Intelligence (AI) can chat with you and answer any question. To test it, we used ChatGPT and gave it top personal finance questions to see how reasonable the answers would be.

Henry: Hi. Can you introduce yourself?

AI: Hello! I am ChatGPT, a language generation model trained by OpenAI. I am designed to assist with a wide range of tasks, such as answering questions, generating text, and more. Let me know how I can help you today.

Henry: Can you recommend something, as to how to build my savings?

AI: Sure, here are a few tips on how to build your savings:

  • Set a savings goal: Decide on an amount you want to save and set a deadline for reaching that goal.
  • Create a budget: Identify areas where you can cut back on spending and redirect that money into your savings account.
  • Automate your savings: Set up automatic transfers from your checking account to your savings account on the day you get paid so you don't have to think about it.
  • Find ways to increase your income: Look for ways to make more money, whether through a side hustle or a raise at work.
  • Avoid unnecessary expenses: Note impulse buys and subscription services that you don't use.
  • Keep your savings separate: Keep your savings in a different account from the one you use for everyday expenses, so you're less tempted to dip into it.

Henry: Great answer! I perfectly agree with those points. Let’s try out another one. Do I need insurance or is it a luxury?

AI: Insurance is considered to be a necessary expense, as it helps protect you and your loved ones from financial hardship in the event of an emergency. Without insurance, you may be responsible for paying for medical treatments, repairs or replacement of your personal property, and other out-of-pocket expenses, which can be financially devastating.

Some types of insurance, such as health insurance, are considered essential as they provide coverage for medical expenses, which can be very expensive. Other types of insurance, such as life, disability, homeowners, and auto insurance are also necessary to protect your assets, income, and loved ones.

That being said, the amount and type of insurance you need will depend on your individual circumstances, such as your income level, assets, and family situation. A financial advisor can help you determine how much insurance you need and what type of coverage is best for you.

In summary, insurance is not a luxury but a safety net that can protect you and your loved ones from financial ruin. It helps provide peace of mind and financial security.

Henry: Another great answer! Without insurance, we would need a huge emergency fund and it may not be enough, especially in extreme cases such as a critical illness. Now, let’s ask you a question that I’ve been getting in the past few months: Should I invest now even though experts are predicting a recession?

AI: Investing during a recession or economic downturn can be a challenging decision. While it's true that the stock market and other investments may experience a downturn during a recession, it's also important to note that recessions are followed by periods of economic growth.

Here are a few things to consider when deciding to invest during a recession:

  • Time horizon: If you have a long-term investment horizon, you can afford to ride out the ups and downs of the market and potentially benefit from lower prices during a recession.
  • Diversification: Diversifying your investments across different asset classes, such as stocks, bonds, and real estate can help spread out the risk and potentially reduce the impact of a recession on your portfolio.
  • Cost averaging: Investing regularly, regardless of market conditions, is a strategy called “cost averaging.” It can be a good way to take advantage of lower prices during a recession and potentially benefit from long-term growth.
  • Risk tolerance: Consider your risk tolerance and investment goals. If you have a low risk tolerance, it may be better to hold off on investing during a recession or to focus on less risky investments.

It's always important to consult with a financial advisor before making any investment decisions. They can help you analyze your personal financial situation and give you personalized advice based on your goals, risk tolerance, and investment horizon.

Remember that market predictions are not always accurate, and that past performance is not indicative of future results. It's essential to do your own research and not rely solely on expert opinions.

Henry: That’s almost similar to how I would answer that question. Timing recessions and timing the market are two different things, and for long-term investors, recessions (or even a few months before and after) are historically good entry points as levels are generally cheap due to the fear and hesitation of most market players.

Let’s go with one last question. You mentioned cost averaging earlier. Is cost averaging a good way to invest?

AI:  Cost averaging is a strategy where an investor regularly invests a fixed amount of money into an investment, regardless of the current market conditions. This method can be beneficial as it can help reduce the impact of market volatility on an investment portfolio. By investing a fixed amount at regular intervals, you are buying more shares when the price is low, and less when the price is high, which can potentially lower the average cost of your investment over time.

Here are a few benefits of cost averaging:

  • Reduces the impact of market volatility: By regularly investing a fixed amount, you are less likely to make impulsive decisions based on short-term market movements.
  • Disciplined approach: Cost averaging requires discipline and patience, which can help you stick to your investment plan in the long run.
  • Potential to lower the average cost: By buying more shares when the price is low, and less when the price is high, you can potentially decrease the average cost of your investment.
  • Suitable for long-term investment horizon: Cost averaging is more suitable for long-term investment goals, as the strategy is to buy low and hold on through market fluctuations.

It's important to note that cost averaging is not a guarantee of profit and does not ensure a profit or protect against loss in declining markets. But it can be a good way to invest for long-term goals, especially for those who are new to investing and want a systematic approach.

Henry: Alright! That’s a wrap. I noticed though that you mentioned multiple times about consulting with a financial advisor. Even though we live in an age now where our computers can start to think for themselves—the personal touch and custom advice provided by financial advisors are still the best option. I highly advise our readers to reach out and consult with an Allianz Life Changer!

Head of Investments

Henry is a graduate of University of the Philippines for Electrical Engineering - the first few years of his career are in building maintenance, electrical design and installations for construction projects and even teaching engineering to the next generation. Afterwards he took his Masters in Business Management also from UP Los Banos and worked at various investment-related roles from a top local bank, a US-based investment company and a global insurance competitor. He is also a CFA Charterholder. 

Currently, he is the Allianz PNB Life Head of Investments.