ChatGPT Designs £2,000 Monthly Income Portfolio of FTSE 100 Shares

An experiment to create a passive income stream of £2,000 per month using FTSE 100 shares was conducted using ChatGPT, a popular AI chatbot. The goal was to establish a portfolio that would yield £24,000 annually, relying on a selection of stocks with an average return of 5%, which exceeds the current average yield of blue-chip stocks at 3.25%. Achieving this objective would necessitate an investment of approximately £480,000.

The user, who has experience building a second income from UK dividend stocks, sought to streamline the process by leveraging AI. While acknowledging that ChatGPT can provide rapid responses, the user expressed concerns about the accuracy and reliability of its stock recommendations, noting that the chatbot tends to rely on outdated information and may downplay risks.

ChatGPT’s first suggestion was **Legal & General Group**, an insurance and pensions provider boasting a strong yield of around 8%. Although the actual trailing yield is closer to 9%, the user highlighted that the company’s shares have stagnated over the past decade. The chatbot also recommended **M&G**, a wealth management firm, which also offers a yield of approximately 8%. The user indicated a preference for M&G over Legal & General due to better stock performance.

The chatbot then turned to **National Grid**, citing its stability and consistent dividend growth slightly above inflation. However, it inaccurately stated the yield to be 6%, when it currently stands at just 4.1%. The user expressed skepticism about National Grid, citing the company’s need to invest around £60 billion by March 2029 to modernize its electricity grid to accommodate renewable energy sources. This hefty investment requirement raises concerns about the company’s ability to manage its existing debt, which exceeds £40 billion.

Another recommendation from ChatGPT was **Unilever**, a consumer goods giant. The user recently divested from Unilever due to disappointing growth prospects and a dividend yield of only 3.25%. ChatGPT also included **Shell**, an oil company, which it claimed had a 3.9% yield supported by substantial free cash flow and a commitment to returning cash to shareholders. Additionally, it mentioned **Vodafone** as a “wildcard,” asserting that its yield is around 10%. This claim is misleading, as Vodafone recently halved its dividend, resulting in a current yield of only 4.27%.

The user concluded that while ChatGPT presented some notable stock options, they would avoid investing in National Grid, Unilever, and Vodafone. They emphasized that investment decisions should be based on thorough research rather than relying solely on AI. Effective retirement planning requires a deeper analysis than what a quick interaction with a chatbot can provide.

In summary, the exercise highlights the potential of technology in investment planning while also underscoring the limitations of tools like ChatGPT in making informed financial decisions. The importance of personal judgment and thorough research remains paramount in the realm of investing.