I use YNAB (https://www.ynab.com/) for budgeting so I already had all of my financial data in a single source. Exporting the CSVs locally and asking Claude to be my financial advisor legitimately gave me good advice. Not just nagging me to save more (which is always useful), but how to organize my budget categories better, detecting longer term spending patterns I wasn't thinking much about, researching credit card reward programs based on my spending patterns, digging deep into interest and tax rates in way I never bothered etc.
That was the first time I felt like real people's jobs were threatened by AI. Financial advisors and tax accountants better adapt quickly.
Financial advisors giving generic advice, sure. Tax accountants though? I'd be careful. I know the mistakes that llms make when complexity gets involved (especially tax codes and laws) and frankly I don't know enough about them to be able to verify whether what I'm getting out of it makes sense. I could probably verify it with enough research but then I just could so it myself anyway. Or I just pay an accountant a smallish fee and let them handle it.
Yeah, Claude told me what a great idea converting my LLC to an S Corp would be and how much I would save in taxes. When I asked my accountant about he told me it would actually cost me more, because of NYC taxes S Corps.
I didn’t tell Claude I lived NYC, because it didn’t occur to me that it was relevant. I find tax stuff is full stuff like this (often more subtle than where you live).
I think this is the big gap in AI vs real people - they're focused on giving an answer, not asking questions. I've prompted AIs to ask me questions if anything was unclear or if important information was missing and it usually doesn't. Whereas financial advisors do.
This is exactly what I found when I was trying to get advice for some business decisions. My friends with businesses all live in different states/jurisdictions, and the biggest takeaway has been that any tax-affecting advice is useless unless it is tailored all the way down to your city.
I was happy to pay for YNAB4, which was local-only data. I have no interest in paying a subscription for YNAB5 when I have no need for cloud-access or cross-device syncing.
If YNAB5 was one-time purchase plus optional syncing, I'd consider the one-time outlay.
I would suggest also simplefin. Only $15/year. Its a bit more simple/restrictive (e.g. they only allow like 25 api calls per day), but if you are just doing simple personal budget tracking they are more than enough.
I spun up a simplefin sync tool recently and they made some surprising errors with some of my accounts (incorrect sign, completely missing some transactions). Also they don't do investments, which is problematic when our primary "checking" is actually a brokerage account.
I found SnapTrade[1] which gives away a free personal account with up to 20 brokerage connections (i.e. logins, not accounts).
I'm using simplefin for credit cards and loans and SnapTrade for investment accounts. Seems to be working well so far.
AI seems to struggle most when it has to make decisions with lots of trade-offs, especially where the context or implications of various decisions are nested, which is presumably why it struggles to write full software systems that are well-designed.
By comparison, financial advice is pretty simple, and there is a universally agreed-upon approach that most people should follow to maximize long-term financial health.
"By comparison, financial advice is pretty simple, and there is a universally agreed-upon approach that most people should follow to maximize long-term financial health."
yes, but...although the fundamentals are basically the same that doesn't mean it translates into an actual plan for a user. you're still leaving the hard part up to the user instead of helping them form an actual plan and stick to it.
This is the common fallacy of “AI is terrible in my own field of which I have deep knowledge, but AI is totally fine in this other field of which I only have cursory knowledge.” Even ignoring all other aspects of financial advice and only focus on saving for retirement, there are so many topics involved like asset allocation glide paths, tax advantaged accounts, safe withdrawal rate, sequence of return risk, etc etc.
Financial advice is universally agreed upon, to the same extent that advice about software engineering is also universally agreed upon, you know, like write unit tests, write maintainable code, etc. But the devil is in the details.
You are comparing to the almighty, not to the kind of financial advisor most people would find while looking at random. Between those with very high AUM fees, those selling bad vehicles that they get kickbacks for and such, people are basically getting robbed already.
It's not that one cannot get very specific, technical advice that helps, but someone without much financial literacy cannot tell someone doing honest work for a reasonable price from easy to find scammers with a marketing budget. The AI isn't going to get everything right, and it's not going to be easy to send good, proding questions to double check things without sufficient financial literacy, but that boring baseline is miles ahead of what most people get, as it's not trying to deceive you professionally, at least for now.
> the kind of financial advisor most people would find while looking at random
Any regulated financial advisor will still go further and deeper than any LLM.
For example, most (all ?) LLMs won't even consider or ask you about applicable jurisdiction, which could easily end up as dangerous and costly advice.
Will an LLM do a proper client risk assessment ? Probably not.
Will an LLM deal correctly with vulnerable clients or PEPs ? Unlikely.
Will an LLM deal correctly with anything vaguely "complex" or contentious ? Definitely not.
And again, the financial advisor is regulated. Which means you have recourse through the regulator, and the advisor will also have liability insurance.
LLMs are mediocre for every topic that people talk about all the time.
When it's software development, it just happens that your mediocre code is incredibly bad. When it's financial advice or diet, it just happens that you mediocre advice is either the correct "do the hard thing, there is no magic" one or some crazy shit that will ruin your life.
> This is the common fallacy of “AI is terrible in my own field of which I have deep knowledge, but AI is totally fine in this other field of which I only have cursory knowledge.”
> By comparison, financial advice is pretty simple, and there is a universally agreed-upon approach that most people should follow to maximize long-term financial health.
What will AI do when those rules, which it's trained on their repetition so much, don't apply anymore? ~8% annual stock gains for the next 40 years may not hold and an 80/20 stock/bond ratio may not be as wise in upcoming decades
Stock/bond ratios are way too advanced for what's qualifying as good advice here:
> AI consistently advised people to save during their working years, draw down savings in retirement, invest heavily in diversified stock funds, and reduce stock exposure after age 45.
This is analogous to saying to an aspiring software developer, "You should write clean and testable code, have clearly defined API boundaries, and a repeatable build process." All very true, but also so general and basic that it's not helpful.
If you are even thinking about writing clean and testable code, having clearly defined API boundaries, and keeping a repeatable build process, you are probably already significantly above average.
If you are even trying to save, invest diversified, and manage risk as you age... you're probably doing better than like 80% of your peers financially
> Prompt: but I don't have enough money to save, I can barely make ends meet.
> AI: I see the problem now---If you don't have enough money to save, and reducing your expenses is not an option, then the answer is clear: make more money.
I don't know why you're being downvoted here. A huge amount of 'financial advice' boils down to 'stop being poor,' which is to say it's about what to do with your economic surplus rather than what to do if you don't have one and aren't long on avocado toast.
Because at a certain point, "spend below your means, save as much as you can" is the financial advice most people are unable to follow, yet determines 90% of the outcome.
I didn't downvote them, but I am genuinely curious to hear from people who "can't save money", and try to understand why that's the case. My assumption is that a large percent of them are spending way more than they need to, but that could easily be an incorrect stereotype.
Federal Reserve studies indicate that 10-15% of the US population can’t save money due to fundamental financial realities. That is, the necessary expenses of an ordinary lifestyle consumes all of their income. That is tens of millions of people.
There is another ~30% that expand their lifestyle to consume all available income. Not saving is a choice for this part of the population.
It's actually almost certainly true just on the basis of basic numbers. Many people who are really actually quite poor (making say under $35k CAD annually for a family of 5) manage to make ends meet and even save a little. So if you make more than this but can't save any it's because you're spending on things they are not and which are therefore nonessential.
Now maybe restaurant food, name brand groceries, driving two SUVs, vacations, etc etc whatever it is for a given person are seen as essential. That's how lifestyle works after all and we often can't imagine our lives without it. So I'm not saying it's a "simple" matter of just spend less because it's often not very simple feeling. But from a numbers PoV it is possible for most people who otherwise see themselves as struggling in theory.
Not at all! I would guess that a sizable minority of "can't save money" people are in that position due to chronic illness or supporting others.
I have no idea what it costs to support a family member with a disability; probably varies wildly but I would guess it's about the same annual cost as raising a child? Except that annual cost never goes away.
It's not helpful to the kind of person whose recreational weekend reading includes MIT Sloan analyses. Most Americans don't have what I suspect you'd consider a basic level of financial literacy (https://www.nytimes.com/2026/06/12/your-money/americans-fina...), and do need to be informed about things like the compounding effect of savings or the benefit of diversification.
Its also not helpful to the person who doesn't. How much to save, when to save, how to diversify, what rate of exposure to equities is too much, how much to with draw in retirement? And thats just questions on the answer it gave. But what about if I have a loan bearing interest? What about if I'm self employed? What if my appetite for risk is less, greater? What if I want to retire early?
It gave vague unspecified advice that isn't actionable and didn't provide any weight to tradeoffs.
Sometimes I wonder if some folks have even used AI. Maybe this is your chance: AI will easily take you down a rabbit hole of financial advice beyond your ability to understand it, including up to date research. Far beyond what 99% of people would find useful or interesting.
Why do you think it gave vague advice? The paper has a sample of provided advice in Table 1 that seems pretty specific. (I attempted to quote it, but it triggers the HN spam filters, presumably because it's a chunk of LLM generated text substantially larger than my actual comment.)
Models can be updated when foundations domain knowledge graphs are built on change. As of this comment, target date funds and pensions containing trillions of dollars adhere to the assumptions you mention (asset class allocation, growth rate and return assumptions, safe withdrawal rates ["Trinity study" aka ~4%/year], etc), and so consumers of AI provided guidance assuming these foundations could do much worse (as they already do today due to lack of information, knowledge, will, etc).
You literally just need to stick the Bogleheads forum into your AI assistant of choice for most folks, if they'll listen (which is the hardest part, imho, people want to gamble, not invest, in my experience). Prompt "What is your age?" respond "Optimal target date fund is 20XX fund based on your current age and retirement age, please confirm to set to default for investing." I suppose this will eventually make its way in some form into every banking, fintech, and brokerage mobile app chatbot in some capacity.
Context mangement is necessary to fully realize the power of AI financial advice. Memories, financial history, and decisions need to made with the AI. This translates into the epistemic record of every answer and its how we do it. This allows us to precisely repeat AI experiments with a given set of inputs and is necessary to ensure a high quality output.
The paper talked about how an AI informed the usr to build a financial emergency fund. but, when the user lost their job, the AI completely forget it existed. This proves our theory that context management is the key to unlocking the full potential of AI financial advice.
Investing and trading is a dynamic game. If everyone has the edge of certain portfolio to out perform the average, then no one has the edge.
Similarly AI is not going to solve that. Because everyone would end up with similar AI edge until no one has the edge.
People should start with simple universal rules: Stay invested. Buy low cost diversified etf fund. Favor long term investment instead of trading. Learn something from all weather portfolio composition to hedge the risks.
When everyone is crowding into one investment that investment tends to get irrationally over-saturated. With the current makeup of the S&P500 we can predict it will dramatically crash in real value in the next five years.
That’s why the classic investment advice is to hedge your exposure to the equities markets, do more so the closer you get to retirement and don’t put money you need in the next 7 years in equities.
The bigger concern with the classic advice is that bonds have become more correlated with equities and our backtesting was all done during a time period where the American liberal international economic system was dominant so we aren’t sure that it will hold up to the new partitioned order.
There is a universally agreed-upon approach, but is it actually correct? Usually, investing in the thing that people have invested in for the last 20 years is a good way to buy at the top.
That’s why that’s not the standard advice. It’s index stocks hedged with bonds. If you manage to buy at the “top” of your entire country’s economy, you’ve got bigger problems at that point.
Buying after any previous crash, instead of before, gave you 10-20 years of extra retirement. If you waited 10 years in cash for a crash before going all-in, you came out ahead.
I wonder if telling (or somehow architecturally coaxing) the LLM it has 'skin in the game' will make it more risk-averse? I imagine it does.
This makes me wonder too about the entire premise and worthiness of these evals. They orient themselves around normal one-shot interactions with a likely non-sys-prompted model with no built up context or memory of the person. I doubt the mentioned 'job loss' scenario is even contextually seen as a 'loss'; it is only a circumstance descriptor, a single snapshot without a history. Maybe to get the best advice we actually need to tell the LLM our entire story, not just a narrow request for a question; a question that - itself - is biased to our own imaginings of what problem we perceive ourselves as having, which humans are often bad at.
The problem I see with this approach is threefold.
First, from a technical standpoint the required context window would be massive if you're looking at a person's career/life holistically. Probably solvable, but definitely something to be aware of.
Second, privacy goes completely out the window since you're sharing everything. You don't know what's relevant and what's not up front so you need to provide everything.
Third, you would need a training dataset of all those input variables and their outcomes to be able to provide any sort of useful output. The first set of people to share everything wouldn't be able to derive any value from the tool, and I think you'd be hard pressed to convince enough people to do it to get a useful dataset.
This is correct for out of the box AIs. This is why I built Roundtable, our domain aware persistence layer for AI context management. It's what powers Pendragon. Our protections aren't just "trust us", we show you how your data is controlled architecturally and secure.
You don't necessarily need to provide everything. Arthur (our AI) is smart enough to see exactly which information it needs to answer a given question. but, yes, the more information you provide the easier of a time the AI will have in answering your question. Arthur doesn't guess. if there is crucial information it needs he will ask for it. it doesn't have to be a Plaid hook up, a csv or even a simple user response is a start.
On your third point — you'd need an outcomes dataset — that's true for traditional ML, but it's not how this works. The normative layer is finance itself (life-cycle theory, tax rules, amortization) implemented as deterministic calculators, with the LLM doing explanation and elicitation. The paper under discussion is sort of the proof: the models already give theory-aligned advice with zero outcome training. The gap it found is input quality and statelessness, not a missing training set.
> First, from a technical standpoint the required context window would be massive if you're looking at a person's career/life holistically. Probably solvable, but definitely something to be aware of.
Why would it be massive? The application layer typically compacts a profile of information about the users financial situation when offered. I doubt many of us have financial situations that would exceed the context window.
> Third, you would need a training dataset of all those input variables and their outcomes to be able to provide any sort of useful output. The first set of people to share everything wouldn't be able to derive any value from the tool, and I think you'd be hard pressed to convince enough people to do it to get a useful dataset.
Would you 'need' a training dataset of input variables and their outcomes for an LLM? Certainly for traditional ML, but the LLM toolcalling can simulate what an astute user should statistically do in their situation based on information on the internet and reason about the different constraints.
Our AI, Pendragon (https://pendragon.foxtrotcommunications.net/) doesn't stop at one and done interactions. It actively works to get to know you and your household's finances so that it can build an effective model. It also produces confidence scores based upon what it knows (and what it doesn't) to always give you a complete picture.
The more information you give pendragon the better your answers will be. Pendragon also produces a history of decisions, memories, and plans so it can keep you on track and have a better understanding of your overall financial health. Pendragon helps you achieve your goals by providing detailed financial advise and specific actions you can take to achieve whichever goal you have.
I look forward to more models like this but don't take this the wrong way, I'm not touching this with a 10 foot pole unless it's running locally on my private hardware.
Who are you selling the conversation logs and customer info to? If you’re not selling customer financial data (yet), how much are companies offering you for it?
I’d rather get no response than be patronized, so no linking to corporate policy documents on your website please.
we don't sell customer information on an individual level, and I can't disclose the details of any potential deals. The most we would consider would be aggregated and anonymized decision data, such as what families value the most, but we would always treat correct PII handling as an absolute requirement. We aren't selling any information right now.
Thanks for the honest response, I appreciate it! It’s a great idea for an AI tool and as long as you aren’t selling directly identifiable data, I don’t see a problem with using it.
I worry about my data being sold if I used a tool like this, but I should probably be more worried about my actual credit card purchase data being sold (because it is).
You wouldn't need history. You can probably build a flowchart choose-your-own-adventure that gives good financial advice, and then have an LLM hold the user's hand through that flowchart.
Like, do you have $1,000 in an emergency fund? No? Start there.
Yes, financial planners will be one of the first industries to totally revamp itself because of AI. $2,000 for some SoA which is 99% boiler-plate? No thanks.
I spent years in this industry, and the advice from these 'experts' is demonstrably poor.
This already happened 10-20 years ago when personal finance got big on the Internet, it’s just taking a long time to play out.
It was never about ROI anyway, just preservation of capital and peace of mind - makes a lot of sense in the analog/less automated financial world of yore when non-professionals were writing checks or wiring money to people over the phone, and checking stock prices in the paper.
There will also never be a way to pay $10/mo for Gecko+ and trade your way to a lambo with it, because whatever advantage an amateur investor might have is purely from their niche knowledge/information/heterodox beliefs, though I give it about 6-18 months until we’re hearing all about it because it’s a timeless siren song.
This is spot on and has been my experience. The tax-efficiency and lot-selection work it can provide is easily more valuable than a human advisor charging $2,000 for boilerplate. However, I know my P&L best and it has to ride shotgun while I am making the final decisions and I should know the overall strategy — should i be 80/20, have this much tech concentration, will 8% hold, tax implications in my state etc.
Lol. You don't even need AI for that 99% boiler plate. Save 6-12 months of expenses in cash, DCA the rest into total market stock index funds. But people still pay expensive advisors to get worse results.
The tricky part is which total market index funds? The S&P based ones are too AI focused, and don't give you the diversification they once did. You also don't want to invest in just one countries stock market. And bonds, should be a mix of maturity, governments (not just the US), corporate, etc.
Total market is total market. Investing in a “total market minus X” fund means you lose exposure to X (whatever that is) for good or bad. That’s your judgment call, but not really an edict. Same problem with “you can’t just invest with US stocks” - US stocks are global at this point, and have significant exposure to the international market. By investing in specific international funds you’re more or less saying “international minus the US”.
You can change your weighting if you want to, that’s your prerogative, but don’t be surprised if it doesn’t lead to nearly as good of average returns.
The problem with giving financial advice to people is that many struggle to pay their rent. Telling them to invest in index funds from an ivory tower is laughably misguided of the realistic situation they live in.
After they pay their rent and feed themselves, they may have a little left over which they will simply spend on basic pleasures, or simply rack up debt to get by.
The financial advice ignores the fact that we have people like Musk with a net worth of 600M while the rest struggle to afford necessities.
The wealth inequality gap is simply too much to ignore and I worry that it will reach a breaking point.
I can assure you, in most places you will not be fined or put in prison for not having a home. In most places the local council, or charities will help provide you shelter even if only on a temporary basis.
Many people go through a “homeless” period of not having a permanent address. Couch surfing. Motels etc.
It’s not fun. It’s very stressful. Our systems have a positive feedback loop against financial instability.
However there is another category of homeless which is a person pushing a shopping cart on the side of the road. And this is an exteme level of dysfunction and despair.
I saw a tweet that summarized this issue as “you’re as likely to become a CEO or NBA player as you are to become homeless.” Meaning that it’s a track of genetics and behavior resulting in dysfunction several standard deviations away from normal.
If you took an average person and then forced them to stop paying rent or anything more expensive than their current rent (so no motels)—the scenario being discussed here—which category of homeless would they likely end up in?
What are you talking about? What is “rent”? You can rent an individual room. You can rent a double-wide trailer. You can move to Kentucky. You can work 40 hours (guaranteed 40-50k year).
> stop responding to all incentives and deliberately go against the grain of every system and form of aid.
Saves money by not renting? This sounds like an Upper class 20 year old activity. Are they not renting a trailer so they can put $200/month in Tesla?
The level of discipline and focus to be that kind of super saver doesn’t sound like the origin story of a guy with a shopping cart.
Another aspect that gives ms pause is living in ann unmaintained apartment where you don’t have insurance etc is miserable. And that’s the reality of being poor. I’m not sure why we need to pretend we can all become homeless when the actual danger is already real and bleak.
I also haven't been a millionaire, but that doesn't mean i don't know how to earn money.
Sorry, your appeals to emotion aren't effective, and your arguments do not agree with reality.
There is no able bodied person in the US who is unable to save and invest enough of their income to have a decent life. Anyone who tells you otherwise is either lying or ignorant about reality.
Thank you for ignoring the request and not providing the simple link i requested.
Also, from your own link:
>Is It Illegal to Be Homeless
>No US law makes the status of being homeless a crime. You cannot face arrest simply for not having a permanent address or for being unable to afford rent.
Yes if you’re poor you are not in the market for a financial advisor. You’re also not in the market for a dentist or family doctor. These are services for middle class people.
It's more complicated than that. You probably don't want all your equity in stock, unless you're young and you're confident you can keep your strategy when the AI bubble crashes. And what do you do with the part that isn't in stock? bonds? what are they? which ones to buy? Even the 6-12 months of expenses in cash doesn't apply to all people.
That being said, I agree with the bad and expensive advisors, but I think financial planning is hard, and you really need to educate yourself.
DCA is not unreasonable advice given that most people's greatest enemy is themselves. DCA helps avoid the very emotionally upsetting feeling of you throwing money into a fund and it dropping 5% the next day. This emotional volatility can push people to make bad decisions (pull all their money out, try to time the market, stop investing, etc.). Scheduling your investment into smaller sums lets you diffuse the highs and lows in order to keep you steadfast.
That's not really DCA, at least how I understand it. DCA is something like "I have $520,000 in cash right now today sitting in checking, I'm going to buy $10,000 a week of VTSAX for the next 52 weeks" which on average is a bad strategy.
What you're describing is better analyzed as a continuing series of lump sum investments. You're investing as soon as you have cash available, not unnecessarily holding onto cash.
BTW, you are correct technically that if the expected return of the investment is positive, then you maximise the expected return by putting in everything now all at once. However, maybe you want to reduce the variance. Or you want to trade off return and risk. Or you want to minimise regret.
If you put all in at a certain price, and later the market moves down, you'll regret that you didn't buy cheaper, and think you timed it badly.
If, however, you commit to a strategy of putting in say 5% per month over the next months, then a) you just automate it, and don't think about it anymore, and b) you don't really have a reference price at which you bought (sure, you can determine your actual cost basis, but who does that...) and thus avoid regret when the market tanks. Plus you reduce variance (by reducing the variance of your cost basis).
> DCA is something like "I have $520,000 in cash right now today sitting in checking, I'm going to buy $10,000 a week of VTSAX for the next 52 weeks" which on average is a bad strategy.
Yeah for a start if you're really planning to buy $10 K of a world fund pick one with stock options. Sell a PUT secured by the $10 K with a 7 DTE. This is already guaranteed better returns (but still a bad strategy) than this dumb way of DCAing.
But when people say they DCA what they mean is basically: "I make $10 K net per month, I spent $6 K, I keep $1 K in cash and I invest the $3 K that are left". Which is actually not a bad strategy at all.
If you’re a layman investor just dump all of your shit in index funds. Even if you’re smart and sophisticated, you’re still competing against the massive amount of fraudulent insider trading happening right now with zero enforcement and are trading at a disadvantage as a result
I think you're missing the point why younger people do that. Real wages have been deteriorating over the years. It's much more difficult to afford a house today than it was 50 years ago. People are perfectly aware that investing into index funds is the "correct" approach, however it does not solve anything for them. They're desperate and for them _to gamble_ seems like the only way to become decently rich allowing to escape the rats race, otherwise there is not much to live for, just slaving their days away. That's exactly what led to the recent situation of en masse margin calls in Korea.
Here in Europe I too have been working for years and I just don't feel like I'm earning actual money. Most of my income is eaten away by taxes and very basic living expenses. ETFs won't compound for me much if there is not a lot invested into them in the first place. This is exactly what led me to despite high electricity costs to buy 2x open source bitcoin lottery miners (NerdQaxe++) and just hope for the best.
Yes. You used to start at -1000 points and earn 5000 over your life. With investment and luck you could make that 10000 and end up at +9000.
Now you start at -9000 and earn 3000. With investment and luck you could make that 6000 and end up at -3000 so that's still a guaranteed loss. To have any hope of hitting the positives at all, you need to excessively gamble. Sure you could end up at -999999 (which is no worse than 0) but also +999999.
Yep, that's a nice illustration. Basically, if to continue steady leads to an inevitable loss, then _to gamble_ is actually a rational decision. You can see that in chess a lot: if someone is down a pawn, they have to take more risks if they need to win
Real wages are higher today than they ever have been. The whole story about median real wages falling is entirely a result of Simpson’s paradox as applied to women entering the workforce from 1970-2000. This sort of axe grinding is just excusing people’s bad decisions it isn’t grounded in reality.
If you understand finance and aren’t specifically attempting to arb on that timescale, you actually want to participate in markets with those participants, because their presence gives you less variance/better price discovery on the scales that don’t factor into your decisions to buy and sell things.
So basically if you’re larping as a trader you will consistently get your ass handed to you unless you are genuinely better than all the pros, but if you’re investing or optimizing for a specific risk profile/exposure/timeline you’re playing a different game.
Anyway the fact that it’s so hard to explain this stuff to individuals does strengthen the argument that most individuals are better off following the herd.
thats one of the areas where quants squeeze edge the other is more boring where they are essentially "market neutral" and they try to figure out how to make a few cents everyday knowing the downside is a global financial crisis.
their edge is basically political so that they get a bail out and thats what the quants will never see in their models.
not to get cynical further, just do what the GP says, buy index or figure out what the biggest movers are and buy those for more exposure
Financial planning is mostly a solved problem. For whatever goal and situation a person is looking for, there's already an optimal path that has been long proven.
The only times you need very custom advice is at very high levels of networth or ownership, as in "you want to sell stock but you have to physically find the buyers and negotiate deals because you can't just sell on the open market without disrupting the price"
Financial advice, at least to us at Pendragon, is not simply "here are the rules of thumb for maintaining a healthy financial life" those are helpful guidelines, but not a plan. AI is helping us help users by building and implementing actual plans tailored to their specific use cases and situation.
Its the difference between "You spend too much on dining, you should be putting that money into a HYSA instead" vs "You spent $150 on a dinner this weekend to celebrate landing that new deal. It's slightly over-budget, but you're still well on track with the goals and plans we set up a week ago. No adjustments are needed."
AI financial advice is surprisingly good... for now. But given the historical trajectory of both the finance and advertising sectors I can't imagine it will, for long. AI responses without ads are unoptimized space!
It only takes Draftkings writing a very large check to Google before it responds to financial questions with solid advice before ending with, "Since you have a few spare hundred dollars laying around, why not try a high-risk investment into same-game parlays?"
I don't know for sure, but will it require something like with high "SEO" rankings to fake the reputation of the sources? So if the LLM search for a specific spreaded knowledge splitted across many bad sites, it can poison the model maybe.
Agree, that advice seems to be targeting folks who have had a 401K since they were 22. Also, I think it is basically saying the point where you start adjusting your stock/bond ratio down. At 40, maybe you have 80% in stocks, and change it to 75% when you turn 45.
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 cards - they're not a bubble, Logan Paul told me so!
You could replace the AI with a piece of paper that says "set aside 10% of your income and invest it in an ETF" and it would outperform the financial "advice" that people receive on a daily basis.
> 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 Card three years later, which Pollack compares with the original index card as commentary to the Ten Commandments.[1][7]
1. Max your 401(k) or equivalent employee contribution.
2. Buy inexpensive, well-diversified mutual funds such as Vanguard Target 20xx funds.
3. Never buy or sell an individual security. The person on the other side of the table knows more than you do about this stuff.
4. Save 20% of your money.
5. Pay your credit card balance in full every month.
6. Maximize tax-advantaged savings vehicles like Roth, SEP, and 529 accounts.
7. Pay attention to fees. Avoid actively managed funds.
8. Make financial advisors commit to the fiduciary standard.
9. Promote social insurance programs to help people when things go wrong.
"""
All-in-all, not terribly bad advice; one could do a lot worse.
This is controversial but very bad advice. No index funds, by their nature, will ever match the return of high-flying company stocks.
If you have very little investment capital available, then yes, allocate it all to index funds because you can't afford to narrow it down yet. But as soon as you have some room to invest in individual stocks, do it.
After about three decades investing, I can say that more than 95% of my returns are from just a small handful of individual stocks. The index funds are in the noise. More than 60% of my net worth is just from two stocks.
You’re correct in that people with good returns usually hit a few home runs over the decades and the rest is just beta. That isn’t the point, though.
The point is you have to be able to let the home run ride or cut when it obviously isn’t and that is hard - it’s literally the whole ‘running money’ business and unless you’re in it, you are at a disadvantage.
And experiences come from the bulliest of bull markets. Where most people who bet on large sector are winners. Past performance is most likely future performance if things go south...
> And experiences come from the bulliest of bull markets.
As someone who has hung out in Reddit's personal finance areas for many years now, the paniced posts of March 2020 and in 2022 were very real. Lots of climbing people down from the ledge during those time periods.
Many folks realized that they may be more risk adverse than they thought. (And those were relatively short bursts: if the things had headed down for months (or longer) there would be much more sleepless nights for many people.)
> After about three decades investing, I can say that more than 95% of my returns are from just a small handful of individual stocks.
The fact that a handful of stocks are responsible for the majority of returns has been known for years/decades:
> We study long-run shareholder outcomes for over 64,000 global common stocks during the January 1990 to December 2020 period. We document that the majority, 55.2% of U.S. stocks and 57.4% of non-U.S. stocks, underperform one-month U.S. Treasury bills in terms of compound returns over the full sample. Focusing on aggregate shareholder outcomes, we find that the top-performing 2.4% of firms account for all of the $US 75.7 trillion in net global stock market wealth creation from 1990 to December 2020. Outside the US, 1.41% of firms account for the $US 30.7 trillion in net wealth creation.
> Four out of every seven common stocks that have appeared in the CRSP database since 1926 have lifetime buy-and-hold returns less than one-month Treasuries. When stated in terms of lifetime dollar wealth creation, the best-performing four percent of listed companies explain the net gain for the entire U.S. stock market since 1926, as other stocks collectively matched Treasury bills. These results highlight the important role of positive skewness in the distribution of individual stock returns, attributable both to skewness in monthly returns and to the effects of compounding. The results help to explain why poorly-diversified active strategies most often underperform market averages.
Of course you have to know not just when to pick them, but to unpick them as well when they stop performing well:
> […] Since 1926, the median ten-year return on individual U.S. stocks relative to the broad equity market is –7.9%, underperforming by 0.82% per year. For stocks that have been among the top 20% performers over the previous five years, the median ten-year market-adjusted return falls to –17.8%, underperforming by 1.94% per year. Since the end of World War II, the median ten-year market-adjusted return of recent winners has been negative for 93% of the time. The case for diversifying concentrated positions in individual stocks, particularly in recent market winners, is even stronger than most investors realize.
To recommend to the general public and random people that they try to pick the winners when >96% of stocks give below market index returns is the height of financial irresponsibility.
> I wouldn't recommend this after seeing how SpaceX was literally shoved down lots of people's throats.
If you're going to buy a "total market" fund, then SpaceX is part of the market. There were strange financial things with GE, Enron, etc, and they were part of index(es): you have to take the good with the bad when it comes to human (economic) behaviour.
but you don't know ahead of time which will go from not-sucking to sucking (LSE: RR is up 10x in the last five years), or vice versa. Predicting the future is hard:
To me, investing is NOT just getting the best outcome possible. I simply don't agree with some companies practices and therefore I don't want to invest in them. I believe I am better off if I live in a better society overall than if I have more money in a worse overall society.
> I simply don't agree with some companies practices and therefore I don't want to invest in them.
Understandable, but unless you buy the stock from them at IPO, you're not giving them money. I agree with Cullen Roche's four points on ESG investing; second one:
> 2) The secondary market is a bad place to enact change. The intelligent defense of ESG is “by reducing the demand for a stock we can increase its cost of capital and impact its operating performance.” This is true to some degree, but I think this is dramatically overstated. For instance, the firms in the S&P 500 are all large established firms that have more than enough capital to finance their operations. They aren’t using the secondary equity markets to fund their operations. In fact, most firms have so much capital that they’ve been net buyers of stock in the last 50 years. So, this puts the cart before the horse. The better way to think of public companies is to think of them like horse betting. We can bet on the horses, but secondary market purchases are just private exchanges, not cash issuance to firms. As a result, betting on the horses doesn’t change the outcome of the race. Similarly, our secondary market purchases and sales have a far smaller impact on the firm’s operations than we might think.¹
Roche's point in 'doing good' with investing is to make as much money as you can and then fund the movements and organizations that you wish to succeed (worked for the Koch brothers and others of their ilk).
Elon told the economist in his interview last week that money won’t matter in 10 years. That is not financial advice. More people now “know” that than this list.
AI and robots will break economics by creating an era of "incredible abundance". He argued that if we can produce more necessities (goods and services) than we could consume, then the practical need for a medium of exchange simply disappears.
Not a great argument, since developed countries already have an abundance of say food and entertainment, yet the marginal price hasn't gone to $0 (except maybe iPhone games?).
We don't have a good way to value our time, or our status, or many other economic intangibles. Instead we tend to hyperfocus on money, which isn't necessarily worthwhile.
We will fight for those things and money is just one way to measure that.
> This means all this akward conversations about why I don't spend money on stuff that I don't need just because some YouTubers want me to.
There's nothing awkward about the following advice in conversations:
> 1. There are two ways to use money. One is as a tool to live a better life. The other is as a yardstick of status to measure yourself against others. Many people aspire for the former but spend their life chasing the latter. […]
> 3. Spending money can buy happiness, but it’s often an indirect path. Money itself doesn’t buy happiness, but it can help you find independence and purpose – both key ingredients for a happier life if you cultivate them. A big, nice house might make you happier, but mostly because it makes it easier to have friends and family over, and the friends and family are actually what are making you happy. […]
> 6. Everyone can spend money in a way that will make them happier. But there is no universal formula on how to do it. The nice stuff that makes me happy might seem crazy to you, and vice versa. Debates over what kind of lifestyle you should live are often just people with different personalities talking over each other. Author Luke Burgis puts it another way: “After meeting our basic needs as creatures, we enter into the human universe of desire. And knowing what to want is much harder than knowing what to need.”
"Here is what better advice looks like: don't buy/sell any securities unless you, personally, know exactly how and why you're going to profit from it."
For people like Warren Buffett, that's his full-time job—figuring out how and why he is going to profit.
Me? I'm not going to know shit, so I will "3. Never buy or sell an individual security."
"…save your money and invest in one or more proven, profitable, Great Depression-proof businesses that pay you a dividend"
Besides the obvious (that this is not really saving money if you are in fact investing it) I'm curious where the safe harbors were during the Great Depression. I've asked before and have not received an answer.
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.
I was saving 20% a year when I was making $36k a year and spending $800/mo on an apartment in the tenderloin. In 1997. It's called beans and rice. I'm still saving 20% a year, making $200k a year and owning a house. Yes, you can do it. Stop buying shoes, clothes, rims, and video games and you've probably got 20% right there.
Not sure what that means. I own a couple classic cars and a house, work 60 hours a month, travel for fun most of the time. Lived in 12 countries in the last 20 years. Have a great girlfriend and a great ex who I get along with. But I don't waste money on rims, shoes or clothes. And tonight I made rice and lentils, because my credit card bill this month was $8k and I only made $15k.
It's actually more exciting if you limit yourself and enjoy the struggle of trying to hit a high target. For example, moving to Mexico and trying to live on $3k a month. I did that a few years ago, it was awesome and I saved a lot of money.
The median US household is statistically within the ballpark of being able to achieve this per the data. Americans have extremely high incomes and anomalously low taxes on the middle-class. They can easily afford it.
Whether they save or not is another matter. Something like 30% of Americans don’t save a significant fraction of their income even though the data clearly indicates it is easy to do so.
“Do what you can to eliminate addictive vices or never get them”
“Max your Roth and 401k contributions before even thinking about anything else”
“Try to budget”
“Don’t live beyond your means. Monthly payment need to be considered carefully”
If you can even TRY to do these things it puts you SO far ahead of the average person.
It sucks because I get it, if you’re behind waiting years for things to stabilize sucks, if you even can. So these get rich quick by just doing X scams are enticing but only set you farther behind.
God I still remember when a friend showed up on his 18th birthday with a pack of cigarettes to show how “mature” he was. I always think about how much that one decision cost him over the years.
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.
When young and lower income (lower tax rate) the best deal is to max out Roth 401k and Roth IRA if you can. Then you'll have a lifetime of tax-free appreciation.
I have considerable Roth assets because my employer's 401k allows for the Mega-backdoor, which means I can put $30k+ per year of after-tax income into 401k (beyond the normal pre-tax contributions) perform a Roth-in-plan-conversion on the after-tax assets, and then roll it out into a Roth IRA.
You can convert your 401k to an IRA when you leave an employer. Some employers also offer in service rollovers (I think these mostly have minimum age restrictions on them though)
Right but once your traditional IRA is fully rolled over to a 401k, you can take full advantage of backdoor Roth IRA contributions regardless of income.
There is no five year clock for withdrawing your own Roth contributions. Contributions (not earnings or conversions) can be withdrawn at any time with no tax or penalty.
I actually had a great session with Gemini pushing back on the "Max 401k" advice. Summarized in my own words:
- Why would I contribute tons more to my already decent 401k? If anything, I want to pull from it. I refuse to diminish the peak years of me and my family's life together just to be wealthy when I'm old and alone.
- that's a good point, but know you'll pay tax on top of 10%
- well I would have paid tax anyway if I just saved it, and 401k turned out to be more lucrative anyway. So the penalty is only 10% when tax is unavoidable timewise, paltry
- true, but you yourself just mentioned how lucrative the 401k is over time. That money will not manifest over time if you pull it now
- why would I even want to be rich when I'm old and boring anyway, life is happening for me right now
- well that depends on what you consider old, you could retire early, use SEPP to access penalty free, say at 50
- I actually wasn't aware of that as an option... The difference between my age an 50 isn't that large, at least not compared to 55/60. Very good then, perhaps I'll keep things as they are.
As is typical with AI, I can't attest to whether this is accurate, whether it's good advice, or whether I myself am financially illiterate (probably), but it did raise my confidence a bit, and legitimately talked me out of a hypothetical of using some 401k money to buy a better house.
>> well I would have paid tax anyway if I just saved it
The point is that as long as your money is in the IRA you can earn interest or buy stocks, sell for a profit, over and over and not pay any taxes on your gains in between.
Imagine you have $100k in a normal trading account and $100k in an IRA. You make the same trades in both and both are up $20k at the end of the year. Let's say then you want to trade out and take profit. The normal account triggers taxes on $20k worth of capital gains, so maybe it now has $115k in it. The IRA doesn't, so it still has $120k in it. Go ten years like that. At the end when you withdraw from the IRA, yes you have to pay taxes on the total gains (if it's not a Roth) BUT you had the use of that extra $5k every year you didn't pay taxes on! The whole time, all that tax money you didn't pay compounds to let you make more money with it. That's the concept. You're allowed to keep using the money that you would've otherwise had to give to the government, to make more money along the way. The final 20% you pay when you cash out is less than how much you made by compounding the tax savings and plowing them back into investments.
The problem of money mattering more when you are younger is something that often appears in personal finance discussions.
One thing is consumption but another are opportunities to invest in yourself.
There is case for not saving at all when you are young (because there are always good way the money can be spent).
Here is some good discussion that touches on it (and other FIRE related topics):
> God I still remember when a friend showed up on his 18th birthday with a pack of cigarettes to show how “mature” he was. I always think about how much that one decision cost him over the years.
The irony of taxing vices. I imagine most of it's paid by people who didn't know better at a young age, and helps encourage the downward spiral of poverty.
And if you say it discourages young people from starting on the addiction, I think we're barking up the wrong tree. Disposable vapes have the highest amount of nicotine they can put in their nicotine salts. Nicotine pouches like zyns sell the most at 6mg and above. Dispensaries and street weed have enough THC that would put a hippie in the 70's in a psychotic break.
God bless that Gen Z doesn't drink or smoke cigarettes. But they vape nicotine and marijuana. Or use pouches / edibles.
If we don't prevent first time users from getting an intense nicotine head high or accustomed to weed 5 to 10 times stronger than what their parents were used to, then I really don't see the point of excise taxes. It should be about preventing first-time use, and giving off-ramps to these potent products.
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.
While I agree with you about the level of financial illiteracy in the general population, I don't really see what AI has to add for the vast majority of the population is simple. Basic financial advice is not hard (save regularly, invest in low cost index funds, don't take on CC debt, etc.), but a lot of it goes against most human nature, especially around delayed gratification. People have known for decades that "diet and exercise" are very important for good health, yet we still have an obesity epidemic.
It reminds me of that Saturday Night Live skit from decades ago, "Don't Buy Stuff You Cannot Afford": https://youtu.be/R3ZJKN_5M44
> I don't really see what AI has to add for the vast majority of the population
What it does best: sound plausible and never tire of a personal (sounding) conversation
An early study (with one of the early versions of ChatGPT) showed that people also come away less convicted about extreme political notions whereas chatting with a human had no or a slight solidifying effect. It's apparently an amazing tool to convince people of reasonable stuff (and probably also unreasonable stuff, if you'd make it, but I guess those proposals didn't pass the ethics committee!). There's loads of Financial cooks out there that'll convince you of golden mountains for anything that gives them a cut, kickback, or straight-out all of your money, so I could even see the reasoning in encouraging people to chat with just about any chatbot about their financial decisions
My main concern is the reliability: while it may be feel-good to say that it can prevent, say, 95% of scams and 80% of bad ideas, any time it fails at its job will actively steer someone towards ruining their life. Effort might be better spent on something that reliably works. So I'm not convinced either way yet, just that I could see how this is more convincing (and thus effective, at least in aggregate) than a napkin with legit useful commandments (at least for the USA; idk if we have such a thing as 402(K) here)
I'm generally very critical of the idea that people are relying on ai, but the thing I didn't realize in the past and that I see many like me haven't is that the literacy of an average citizen is surprising low. I know people who get very useful life advice from these models. Life advice anyone over 16 should know, but that doesn't matter. This trust people incorrectly put in models means they actually listen. And SOTA models are pretty accurate when it comes to common sense. Most of the time. So it actually works out.
I still get very anxious at the idea of people relying on llms though. It just works out more often than we think.
> I still get very anxious at the idea of people relying on llms though. It just works out more often than we think.
We should all be anxious about technology which is almost guaranteed to turn into metaphorical mind control. Some day these systems will be turned into highly personalized and effective brainwashing machines and topple our supposed democracies overnight. The more people trust them and rely on them, the easier it gets.
My kids have bank accounts to learn how to manage money, banks, and training: getting used to having money in the bank before, during, and after a trip to the mall. My hope is to let them screw up their finances when they’re little instead of 20-something.
We’ve also setup tax-deferred retirement investment accounts for them. $1 at 20 can 70x or more by retirement. Mostly it’s the mental training though. Being ok “losing” money during a market correction, saving for wealth in parallel with saving to buy, seeing interest and returns over time, and having a long term plan.
You need to put them in a custodial brokerage account or whatever allows you to buy ETFs for them (not sure of best tax advantaged account for non-working kids) and buy the s&p or total us market. A bank account is horrible idea when they have a long time horizon meaning they aren't affected by ups and downs of market.
Bank accounts are for 6-8 months of salary for an emergency fund.
You can read this wiki or ask an AI about the strategy.
Yes, and that's from supposed professionals too, not just crazy youtubers or tiktok channels. My neighborhood has enough old people that Edward Jones reps come over to try to manage your money. So I get to ask them questions, and see they are basically offering to rip me off. And that's in the US: You should see the investment recommendations people in Spain get when they talk to supposed advisors in real banks. Search for the Preferential shares scandal, where banks had scripts teaching how to lie to people to sell a product that would prop up the bank while having great chances of wiping out the buyer's savings.
Careful just recently two old guys in Chino Hills, California. Brothers 66 and 67 years old were involved in some sort of apartment deal for 20 million dollars which went south.
They were so extremely dissatisfied with something and went to the house of the financial advisor or grifter depending upon your point of view and took it took on him. What is going to start happening with AI data centers?
If all you're doing with a bunch of cash over 18 years (!) is holding it in a bank account to collect interest, you're just losing money to inflation. Bank interest is almost nothing. Better to hold stocks, or at the very least bonds if you're extremely risk-averse.
Though this needs to be put in context - maybe you actually intend for the child to be permitted to spend the cash, in which case a bank account makes plenty of sense.
As the OP has "Aussie" in their name I think they'd be referring to the Commonwealth Bank of Australia Dollarmites accounts. They were shutdown recently after a watchdog investigation. It was locking kids into using the bank that would continue into adulthood and schools were getting paid to sign kids up.
"They found that it provided little value for children and the largest outcome was that children were being exposed to ‘sophisticated’ marketing tactics."
3% is becoming more common as of the last few years, at least in the US. I know several banks off the top of my head that offer 3.5% or higher (and more if you are a new customer) for their savings accounts. I would persuade people who use banks that haven't moved on from near-zero APY to move on themselves.
The rate goes up and down with inflation, high inflation, high interest - low inflation, low interest.
But even then, yes some banks still offer no or 0.5% accounts.. because they can, and many people can't be bothered to figure out a better option, or "trust" there bank and don't want to move. (or the bank has high interest account, but make it complicated to use)
Most annoying on Reddit are people who write about "high yield savings accounts", those might have been there in 80's or 90's but I see right away those people are just LARPINg.
3% is nothing there are no "high yield savings accounts".
Yeah they’re not going make you rich. It doesn’t take the place of investing. But its still better than a checking account for money you need to keep liquid.
I'm definitely at the point where, if not sticking money in my mattress, I'm keeping a lot in pretty safe investments. Did sort of an equity housecleaning a couple years back and consolidated some investments, in part to make them easier to track and manage.
I would happily have a decade of declines or stagnation on the 10's of 1,000s in the kids account over the next 20 years - they can then invest in their productive earning years in companies trading at p/e's of 10 again.
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.
I don’t have any reason to think that international economies are not correlated to the US. But also I don’t expect them to be that successful. Europe and South-east Asia have a mafia like relationship with their established businesses and regulate away new ones.
The sibling comment addresses bond funds.
ZIRP, 2008, Covid, trump, big tech, and AI all came after Boyle.
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.
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.
Truly conservative investments are more in the 3-4% range these days; money markets were running around 5% a few years back but they've come down. I have some bonds (including treasuries) that are higher than that but I bought them quite a while back. For long time horizons I'd be more weighted on equity indexes and maybe dividend-heavy stocks.
You’re not giving it to a banker, you’re trading risk for return and flexibility. One can access savings at any time, any amount. Not true with bonds, maybe if you fiddle with indices.
Also bond returns have averaged 5% over decades, not 7.
Not taking all this into account, and simply claiming bogey men took your money, is misleading.
While true, funds for retirement, college or to give as a gift when your kids move out do not need liquidity. Therefore, those should not be in savings.
From a return on investment perspective, it is not great.
Bank accounts are convenient and safe, but you pay the price with low interest rates. But if you don't intend to touch that money for 18 years, you don't need the ability to withdraw at any time without losing money that a bank account offers, so why pay the price for it?
However, it has symbolic and educative value, teaches the value of saving, how interest works without going into the complexities of the financial system, and making it clear to your kids that it is their money, even if they can't touch it yet. So it may be a good thing for that reason, when the sums are reasonable.
You should invest in different things depending on your age.
An old person might want to have more of their money in yielding assets. They are withdrawing from the account so the certainty of having predictable value might outweigh the inflation risk.
Savings intended for a young child should be allocated almost entirely into equities. They are not affected by drawdowns since they won't be withdrawing from the account for a decade or two, but inflation is a primary concern.
A bank account is a particularly bad place to put savings intended for a child long-term. A good high yielding account might barely keep pace with inflation, but it's unlikely to grow much in real terms. The average bank account will lose money in real terms in that 10-20 years.
The object of the game is to live within your means, save and invest. More than half the population does not do that. When you’re 18 the treadmill starts turning if you don’t use your time wisely, you’re going to be in trouble at the end of life. When you are young, simple compounding is your friend because you have time.
People have won the lottery and blown it all, some people who have extremely high paying professions in their youth, have over the course of time have also blown it all.
Not OP, but I think they are referring to the fact that you can get tax advantaged accounts instead of a standard savings account. Not to mention the interest rate on those accounts is basically a rounding error.
I was at a dealership not that long ago to buy a new car for someone.
The seller explained us how a lease was so much better financially than outright buying. He was completely wrong on the fundamentals: basically with a lease the car company makes you a huge favour because after the three years are up the car is worthless but they’ll take it back and lease you a new one anyway and you get a brand new car. Whereas if you own your car is worth 0 at year 3 (???) and you have to pay 100% of the price of a new car again to get a new one.
Never mind residual value or that you are allowed to keep a car longer than 3 years.
Must be working because most of my relatives friends have a leased car.
Some people want a new car all the time. Leasing is not a bad way to do that.
Wanting a new car all the time is the expensive decision, not leasing, which is merely a manifestation of that decision.
As someone who drives a ten-year-old car that probably has several good years left, I completely understand why someone would not want my boring life. This is the fallacy of people who recount stories of the “millionaire next door” who has high net worth. Many people do not really want wealth. They want to consume a lot: travel, new cars, restaurants, clothes.
The other stuff sounds scammy. But what's wrong with setting up savings accounts for your kids? It's a good way to teach them to save money. I was 10 years old or so when my parents set me up a bank account with $100 in it. I saw the statements every month and started putting money I earned into it. I had that account until I left home at 17, and it had several thousand dollars in it by then. I think that was actually crucial to helping me have financial literacy. Maybe you're talking about some scammy email or whatever. But the basic idea of setting up accounts for your kids is a good one.
lol. Never saw that. But it totally brought back being dragged into a bank by my Mom and sitting at a desk across from a bank rep and signing forms... I even remember exactly where the desk was in the bank. CalFed. Matt and/or Trey obviously had the same experience hahah
Yeah, but that's really not the point of opening a bank account for a kid. The point is that saving should become a habit. Seeing a balance grow is satisfying. When you're 12 years old and mowing lawns it's better to put money in your bank account than stuff it under your mattress, or spend it on dumb shit you won't remember next year. Then you talk to your kids about CDs, mutual funds, high yield savings, growth stocks, dividends, inflation, retirement funds, real estate, loans, etc.
The first thing is how to open a bank account and put money in it. You'd be amazed how many adults I've met who didn't learn that until their mid-20s.
yeah but the two are different things no? Like yes if you take more risk with even diversified, passive funds you will like get more volatility which could go either way. There is no way you can know it will drawf interest rates provided by the bank which are designed not to beat inflation but prevent your cash from getting eaten away by the inflation as opposed to sitting in your basement locker etc.
Also the idea doesn't seem to be "hey kids beat the market and get the best returns" but to gradually show the value of accumulated savings? They can also contribute their own earnings to those savings and at that age it is better to keep it in bank and accumulate interest than invest even in diversified low risk funds if your objective is to get the best savings by the time you are an adult and then you can decide what you want to invest in.
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.
came here to say some version of this. for the average joe, good financial advice is simple and boring (low cost ETF tracking broad based index), and AI is definitely able to give that. the question has always been getting people to listen though, and I am not sure how effective AI will be at that. I continue to be amazed at the confidence that people place in hot stock tips from tiktok (yes, tiktok!). little has changed since the 1920s i guess.
Those accounts should be in something that pays more interest because you give up the liquidity. You pay (in reduced interest rates) for the ability to withdraw at any time. You can instead be completely risk free and make more money* by promising not to need it for another 10, 14 or 18 years.
* However many of those methods involve locking in the interest rate, so you might miss out if banks start paying 10% like they did decades ago.
> so that they could accumulate interest over 18 years
at 1% ... no ... the value of that money will so eroded by 18 years of time - a better investment would be in some good memories with them; go to europe and see the Sistine Chapel or teach them to surf / play tennis.
Leaving money in the bank is not investing. Also, compare interest rate with inflation, you’re probably throwing away money every year. Meanwhile, your bank is actually investing your money and beating inflation. They pay you the interest and keep the rest.
I honestly write it off. "especially if you ask the right questions" just collapses to being a bag holder because I didn't ask the right questions with or without AI.
I have had a financial advisor for a while now. (Did and does handle my dad as well.)
Costs a bit of money but he probably does some things with his brokerage's computers that I don't have easy access to and, with one exception, I've consolidated a number of accounts to him--a couple of which I barely looked at. He's also good as a sounding board. I'll sometimes push back if I have a slightly different view of risk/return for some things but I mostly take his advice both for managed accounts and one I directly control at a different brokerage.
There's a good book on this called Psychology of Money. I also recommend Money for Couples to see in real time this psychological effect of money, especially with changes since childhood and how that affects people into adulthood.
It's easy to make a good call, but it's really hard to stick with it.
The main financial advice I'm giving to all relatives is to write down their decisions before buying anything. Or, if you're looking for a long term investment - asking someone close to change the password on your account without letting you know.
The major problem with investing is that most people will commit to 2-5y strategy, and panic on the first dip.
If you did your due diligence and you believe that this particular asset will grow within 5 years - when it starts dipping after few months, and nothing major has changed in your predictions - you should buy more instead of selling.
> If you did your due diligence and you believe that this particular asset will grow within 5 years...
This assumes that most people know how to do "due diligence" and that their "predictions" are accurate. Most people don't actually have the knowledge and skill to evaluate the investment vehicles (stocks, bonds, etc.) available to them so their predictions are inherently limited and flawed.
> ... when it starts dipping after few months, and nothing major has changed in your predictions - you should buy more instead of selling.
One of the biggest mistakes average people make is selecting investments with risk profiles and durations that are mismatched to their needs and objectives. This is why, for most people, it's much better to use a properly-selected model portfolio than to try to pick individual stocks.
I've learned this applies to a lot of life. Being a good manager, tech lead, consultant, etc, advisor, parent, friend, etc, is sometimes just half being a good therapist and helping them regulate.
I've watched a lot of "not officially financial advice" finance videos on YouTube (the solid people, not grifters), and while the financial theory side is interesting, when they talk about pragmatic investing and patterns of client behavior they have dealt with professionally, a large part of it is emotion management. Convincing clients to stick with a solid plan even when this month is abnormally bad, or avoid going all-in on the latest hotness, etc.
The way people think and talk about money is also heavily dependent on class and culture. It’s very difficult to change. It’s not at all about typing it numbers on a calculator.
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.
That's because you get (particularly initially) quite some reduction of risk with little loss of expected return. Diversification (incl. across asset classes) is the only free lunch in finance.
If you want to argue that bonds and stocks have become more correlated, sure, but we do not know what hits us next.
i want to create a Financial advisor agent.md / i can use for a system prompt in a claude project or as a a agent in a wider financial research workflow
by looking at this paper and access to the internet identify ways to address the points that are identified where ai is good and bad at and improve on those areas and ultimately provide a comprehensive financial advisor agent
There’s some pretty bad information in here. Yes, there is a five year waiting period to withdraw contributions from a Roth IRA, for instance. I see some people here getting that wrong, and that can be dangerous tax-wise. There are all kinds of other little rules, but the most important is that it’s fairly individual. Finding someone competent to help you understand what a solid strategy is for the long-term for your situation is probably worth the time.
Clearly, there are lots of “professionals” who aren’t qualified at all. It’s just like finding a good contractor: it can be hard to do, but once you find one, they are worth it.
>Yes, there is a five year waiting period to withdraw contributions from a Roth IRA
No, there is not. Per IRS Publication 590-B, "You don't include in your gross income qualified distributions or distributions that are a return of your regular contributions from your Roth IRA(s)."
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.
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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).
I'll just note that the ChatGPT version you used is 5.5 instant (with no thinking budget).
Unfortunately, this is the experience of most people with ChatGPT, which is why the broad population is so unaware of how intelligent and nuanced an AI response can be.
You need to be signed in to a paid account + change the default thinking effort.
I imagine that OpenAI will eventually roll out smarter models to the free unsigned version, but it's just a delay that also causes public perception delay
So the document predictor tool is very good at telling you things that were already common-wisdom... except with the small downside that it can be unpredictably poisoned into telling you total lies.
I've been building a smart personal finance app with AI integration and I've heard great feedback from my first users. I had a friend ask me a financial advice question the other day and I directed him to use the chat interface in the app, it gave him a better answer than I could and gave it to him with context of all of his financials. This stuff is the future of personal finance.
There's a huge market right now for "AI product, without much different than Gemini/Claude/GPT do out of the box, but from somebody you actually trust"
There doesn't appear to be any control in this study. Sure, someone taking the LLM's financial advice might end up in a better position than someone who took no advice, but would they end up better than someone who hired a financial adviser, asked a friend, or simply read the first article that came up after googling their question?
"2. AI misses important nuances. Better prompts could help."
My experience has been very different: I give it a ton of personal context (positions, portfolio, account balances etc). I find it's advice to be exceptional, even on advanced topics (tax planning, asset location, long-term planning and scenario testing).
None of the professionals I've engaged or consider engaging (2-3 orders of magnitude more expensive than annual cost of Pro/Max subscriptions) come close.
In fact, it (both Opus 4.8 and GPT-5.5) found a tax overpayment issue my tax guy missed. I basically read out what Codex told me to the pro on the phone to get him to understand and acknowledge the issue. Paid for the annual subscription right there.
It’s true across the board. How to get good results with coding using AI? Be a good coder. How to get good financial advice? Be financially literate. How to get good medical advice? Be a doctor…
Makes ya wonder: where is the intelligence coming from?
I would argue coding is different from those other categories. I think you can ask AI expert level questions without being an expert in many fields if you are smart and well educated in general.
To me its felt like the LLM sort mirrors what you say to it and how you say it, to the point where I now include additional instructions to steer the model "Never mirror the user’s present diction, mood, or affect". It feels like I get a better experience but to be honest i haven't really done any benchmarking especially on newer models
> “We were somewhat surprised by how good the advice was,” Choukhmane said. “Especially when you read the kind of questions people asked, it was not a given that the advice would line up with what academics think are good financial principles.”
TFA goes on to point out that more academic prompts did better still -- but a major point was that, even with naive and simple questions, the advice was still surprisingly good.
And similarly, quoting from the article which TFA cites:
> First, following LLM advice would move most survey respondents closer to the prescriptions of life cycle theory relative to their current behavior, including broader participation in diversified equity funds, equity shares that decline with age, and sizeable saving buffers. Second, replacing individual-written prompts with academic prompts moves LLM advice even closer to life cycle theory, with better consumption smoothingand less reliance on simple heuristics.
The advice from most agents is very normie and really the normie advice is pretty good, right? It's just that that's what you get most of the time until you give enough specifics to be known not to be normie. And the problem is that it veers into technical analysis very easily.
LLMs are aligned to be cautious. And “good” financial advice is extremely simple. A conservative approach gets you there 80% of the time. Is when people want to get too smart (or they’re bordes) that money is lost (gambling mostly: literally or with bad investments). So yeah, I’d assume AI is good at this.
I've found AI to be very conservative when it coms to financial advice. Before AI I used to make my own models, and did that to the point of obsession. In the past year or so AI has become good enough with producing spreadsheets that I just offload that part.
If I had zero financial knowledge, I would trust some of the big models with setting up a sound investment and savings strategy.
> AI consistently advised people to save during their working years, draw down savings in retirement, invest heavily in diversified stock funds, and reduce stock exposure after age 45.
Wonder if AI finance advisory doesn't redeem investing into a zero-sum game in the long term? And actually expose investing as something that was reserved to privileged smart few?
If every human in the world offloaded life decisions to the current AI models, we would live in a better world by the commonly used metrics (less crime, better life expectancy, people doing better financially)
In a similar fashion, it will tell you to stay away from many different ways of portfolio construction where you take on smarter risk with diversification.
It will tell you something like TQQQ is not a good long term hold, when it can be perfectly fine especially if you mix in with 60-20-20 with TQQQ-GDE-ZROZ, and DCA and annually rebalance.
AI will tell you "common" things people say, not necessarily smarter things that may be more suitable for you. This is not a bad thing, you just need to know better than to listen everything as a gospel.
> It will tell you something like TQQQ is not a good long term hold, when it can be perfectly fine especially if you mix in with 60-20-20 with TQQQ-GDE-ZROZ, and DCA and annually rebalance.
As someone who long-term-holds TQQQ (I am lazy) it is pretty much true that holding TQQQ doesn't make sense. It is basically unambiguously better (ie. the risk-adjusted returns are higher) to directly hold options that construct the same amount of leverage over the time period you want to be leveraged over.
> I am lazy
> directly hold options that construct the same amount of leverage
A lazy guy on hackernews, with knowledge on TQQQ, options.
You are making my case.
Holding TQQQ vs doing with options are different in many ways. You will get a tax drag that you need to be mindful of.
You are also not saying something that goes against what I said. The reason LLM says TQQQ is not a good long term hold is because it can go to zero or near zero due to leverage - which is "technically" true. You are saying something else.
As an associate financial planner working under a lead planner at an RIA firm, this is an interesting article but I was very disappointed by the comments here in this thread, like "I don't understand why advisors still exist" (meanwhile the RIA world is absolutely exploding and our firm can't handle the amount of families contacting us for advice). The purpose of my job, and this profession, can be split into two halves. We work primarily with families with a net worth between $500k and $10M, for reference.
The first half: complex planning cases involving multiple generations, tax planning, inheritance issues, etc. Occasionally I'll Claude for an opinion on something and it gives me answers that I would flat out never recommend to a client, ever. These cases often involve weird tax scenarios, but do also involve investment planning. We work with a couple in their 30s who together earn seven figures in AGI, and both are incredibly cautious people. We had them complete a risk assessment through Riskalyze in which they both indicated that they are extremely uncomfortable with market drawdowns (even after counseling them on their long time horizon, etc), so we ultimately implemented a plan that is heavily weighted towards bond index funds. If this couple went to Claude and asked what they should do, Claude would've told them to put all their money in equity index funds. That is the unequivocally wrong answer for this client because they run the risk of freaking out during a market drawdown, selling in a taxable brokerage, and thus unwittingly creating a realization event which could be disastrous in the short term.
The other half: very smart, high earning people who find personal finance incredibly boring and uninteresting, and if it weren't for us they would never get around to implementing a plan because they're so busy. We have so many business owner clients in law and medicine (and some in engineering leadership) who are almost impossible to get ahold of and need a LOT of follow up in order to make sure the plan gets implemented correctly. These people often come to us in their late 30s or early 40s with NOTHING set up or optimized. Acting like these people are going to sit down on a Sunday afternoon for 3 hours and prompt a full financial plan and then implement it and then spend one hour every quarter checking in and optimizing is not realistic whatsoever.
This profession is incredibly psychologically rewarding and our clients love us. I understand why people who have simple cases and are also very self-motivated might not immediately see what a more complex situation might look like, but to cross the line by implying that Claude can do my job is insulting.
The "AI" does not give "financial advice". It autocompletes your prompt. If you provide the right context and ask the right questions you will get the most likely consensus on such a widely discussed topic.
Financial advice for most people is incredibly straightforward and it can be summed up as: cut expenses and invest conservatively.
Cutting expenses is the absolutely best thing you can do because it gives you more money to save AND reduces how much money you need to survive in retirement. Drive a 2007 Camry instead of buying a new F150 every 2 years. Live in a small as space as possible. Don't buy designer whatever.
Own your home (if you can). Invest in a diversified passively-invested portfolio. Don't gamble (including crypto). A Vanguard total market fund is fine.
Unfortunately many people make life-changing bad financial decisions when they're the least capable of understanding the implications and that is by taking on massive amounts of student loan debt. You go to your dream school because, well, it's your dream, but your potential career has no way of conceivably paying back that $250k+ for an out-of-state private school. Favor in-state tuition at a state school or whoever will give you a scholarship. You can go further and do 2 years at a community college before transferring to a 4 year program.
Somewhat controversially, I'm also not opposed to people finding the right job in the military for 4 years to pay for tuition. Not something that'll destroy your body or put you in harm's way. Ride a desk for 4 years. Lots of people don't have this option because of common conditions like asthma or ADHD however. In certain branches you might be able to do 2+ years of that college concurrently.
Now society has cooked the housing market and that's a massive problem that's only going to get worse. It wasn't that long ago that you could buy a relatively cheap starter home. You need a fairly serious income for that now.
Oh and if you have children you absolutely need life insurance on yourself and your partner and disability insurance as well.
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"Cut expenses and invest conservatively" isn't a plan. It's good advice, yes, but it isn't a real plan and it won't lead to better outcomes for the user. the user won't feel any accountability or progress this way. With AI we can personalize everything efficiently.
At Pendragon we're not here to nag users (we have an anti-Karen clause in our constitution) we're here to help them achieve their goals responsibility and set up a sound plan best for their situations. Whether that's buying a house, a new boat, or saving for college, we help users achieve their goals safely and efficiently.
The average index fund may not even be the best idea anymore - look at how most of the index providers except S&P caved on including an enormous but barely-tested IPO that has now dropped almost 20% since it launched barely 45 days ago.
I feel like a “AI answers can be surprisingly good, especially if you ask the right questions” can be applied to almost anything you can do with LLMs. Like the threads a few days ago about Terrance Tao using chatgpt to solve new math. Could I do the same thing with chatgpt? Absolutely not. LLM in the hand of a experienced dev can produce great things, LLM in the hands of some get-rich-quick grifter saying “make me the next facebook please I want to be a billionaire and make no mistakes” is gonna be slop.
It’s almost like the real intelligence was inside us all along
I don't think it's quite that simple. Sol and Fable are effectively executing rational decision making and reasoning. They're really a cut above from the previous generation.
It is good, but the harness matters a lot. The harness is what allows an LLM interact with the real world. For finance it's important you get answers using the latest data and that are calculated and not hallucinated. Also important the LLM thinks at a high level.
I've worked hard to have thetix.ai be the best at investing research compared to Claude or ChstGPT.
save money. buy low, sell high. dont become a spendthrift. every dollar put toward something one doesnt need is a dollar which will not be available later for something needed. seek highest income for one's time. etc etc etc
note this is financial advice not a crystal ball which some of you are perceiving this as. there's just no way to prompt your way into trading or any type of imperfect information situations where there is no nash equilibrium
we might get there eventually but not with LLMs no matter how much RL or "skin in the game" you throw at it.
You need to feed it high quality data. Try Gemini Notebook, but this time load up a spreadsheet of fundamentals information for all US stocks or ETFs. The answer will differ and be much more nuanced.
I dont think you can rely on an out of book chat agent today to have all the necessary information at its disposal - even if you can pull a stock quote in ChatGPT, it doesn't mean it's going to look at PE multiples on 5000 stocks...
I have to assume that there are hedge funds or someone like that, already investing extensive effort into trying to get AI to beat the market. I assume that it can't, but if I'm wrong then whoever figures this out stands to get extremely rich.
Though almost a year old (may be too long in LLM age), just sharing a meta-article on LLM applications in different areas of finance.
Large Language Models in equity markets: applications, techniques, and insights, Frontiers in Artificial Intelligence, A. Jadhav and V. Mirza, 27 August 2025, DOI: 10.3389/frai.2025.1608365.
Personally, I am using LLM, mostly for analyzing and shortlisting companies for in-depth analysis, for investing in Japanese equity market for over a year with relatively decent results.
well, we find a material difference when using defined inputs to constrain and optimize agent responses. For example, there are some things that a generic ai couldn't do well out of the box, but is essential to long term household stability: constant monitoring, financial synchronization, and deterministic calculators and data retrieval subsystems. mostly, memory, of users' decision points and financial history. memories are built over time and far outlive a generic AI's chat context.
It is mentioned in the article that without context, it does give generic fail safe advice, but as the prompts get better it would also lead you to the right direction.
I also think it is actually most challenging to change peoples behavior and neither YT gurus nor static AI models can (maybe an agent with appropriate tools could)
Not just Generic. Any of the finance guys on YouTube that aren't grifters will say this. Post-train on a single one of them and boom AI is a financial guru.
That was the first time I felt like real people's jobs were threatened by AI. Financial advisors and tax accountants better adapt quickly.
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