The Worst Financial Advice Grok Gave Me and What Experts Say To Do Instead
Written by
J. Arky
Edited by
Rebekah Evans
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When it comes to artificial intelligence (AI), chatbots like Grok will get you results to your inquiry, but they might not be correct or exactly what you are looking for. That’s especially true when it comes to sound financial advice, good or bad. Before asking experts what they think, GOBankingRates asked Grok to provide the worst financial advice it could and the AI chatbot gave the following answer.
AI’s Bad Financial Advice
“The absolute worst financial advice would be to liquidate all your assets, including retirement savings and emergency funds and invest every penny into a single, highly speculative penny stock based on a random social media tip,” Grok wrote.
“Then, max out multiple high-interest credit cards to buy luxury goods you don’t need, assuming you’ll ‘flip’ them for profit later,” Grok wrote. “Finally, quit your job and day-trade full-time with no experience, using borrowed money, while ignoring taxes, fees or any financial planning. This reckless approach almost guarantees massive debt, total loss of savings and financial disaster.”
GOBankingRates then reached out to financial experts to get their take on Grok’s poor money management instructions and got insights on what to do instead.
Planning Versus Risking
The advice that Grok provided is actually a blueprint to financial devastation since it is both heavily concentrated risk and a total lack of planning, according to Paul Ferrara, senior wealth counsellor at Avenue.
“Among the most effective responses to this is to diversify your holdings by investing in asset classes that do not move in unison,” Ferrara said, noting that mixing equities, fixed income and cash reserves in different combinations is a way to mitigate volatility and prevent a total loss.
“Even a simple mix like 60 percent equities and 40 percent bonds have in the past offered a much greater stability than an all-or-nothing bet would have,” Ferrara explained.
Build Up Cash Reserves
The next countermeasure Ferrara advised is to put liquidity into your financial plan and went on to describe that maintaining at least three to six months of expenses in an emergency fund will not put you in the position of having to sell investments at the worst time.
“In case your household uses $4,000 every month, $12,000 to $24,000 held in cash or equivalents would cover a loss of income or other emergency spending without being thrown into high-interest debt,” Ferrara said.
Cut Credit Card Usage
Lastly, Ferrara urged that credit should be used as a tool not as an extension of income and Chad D. Cummings, CEO of Cummings & Cummings Law agreed.
“Credit card companies will sue, garnish wages and secure judgments that attach to bank accounts or property,” Cummings added. “For clients in community property states, this exposure extends to spouses. It is not hyperbole to say that this single act can destroy your financial life for seven years or more.”
“Reducing balances charged at rates of more than 15 percent provides a risk-free return of that rate, usually better than what most investments can realistically earn,” Ferrara explained. “Such an arrangement of your finances brings flexibility and strength, whereas the unorganized schedule that Grok proposed is the complete opposite.”
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