Many of you are now using AI tools to understand investments, portfolios and financial planning. I see this as a positive development.
I say this clearly: please use AI. Use it to learn concepts, understand financial terms, compare broad ideas and prepare better questions. But please do not make the mistake of treating every AI-generated answer as complete financial advice.
There is a difference between information and judgement.
Let me explain this through a simple example from healthcare. A doctor gives a prescription. The patient uploads the prescription into an AI tool and asks for a second opinion. The AI explains the reports well and then says that one more important test should have been done. The patient gets worried, spends big money and gets that test done. Later, the doctor looks at it and says, “This test was not required in your case.”
Was the AI completely useless? Not necessarily. The test may exist in medical literature. It may be relevant in some situations. But the AI did not know the patient the way the doctor did. It did not examine him. It did not know the full medical history, severity of the condition, other symptoms, clinical judgement, or whether that test mattered for that particular person.
The same thing can happen in financial planning.
You may upload your portfolio into an AI tool and ask, “Is this portfolio good?” Within seconds, it will give an impressive answer. It may comment on fund overlap, expense ratios, recent returns, sector exposure, asset allocation and underperformance. The language may be confident. The format may be neat. Some points may even be correct.
But what has the AI actually seen and, more importantly, not seen?
It may have seen only a list of funds. It may not know your goals, pension, income, liabilities, tax position, family responsibilities, children’s education plans, retirement needs, insurance status, emergency corpus, other existing investments, risk capacity, or behaviour during market falls. It may not know which investment is meant for which goal. It may not know why a fund was selected, why another was avoided, or why your portfolio has been built in a certain manner.
A portfolio is not a collection of mutual fund or stock names. It is a structure built around a family’s life.
This is why some AI answers can create unnecessary worry. Take the common issue of fund overlap. AI may say that two funds in your portfolio hold some overlapping stocks and therefore your portfolio is not properly diversified. This sounds serious. Sometimes it may indeed need review. But overlap by itself is not automatically bad.
Two fund managers may hold the same company for different reasons. One may hold it as a long-term core investment. Another may hold it tactically for a shorter period. They may have bought it at different prices, with different expectations and different roles in their respective funds. In some cases, overlap is excessive and should be corrected. In others, it may be harmless. Sometimes it may be intentional. A number alone does not tell the full story.
The same is true of expense ratios. A cheaper fund is not always better, and a higher-cost fund is not automatically unsuitable. Cost matters, but so do consistency, risk control, investment style, mandate, taxation, liquidity and the role of that fund in your financial plan.
Similarly, a fund that looks ordinary over one year may still be doing exactly what it was chosen to do.
Financial planning is not the same as a performance ranking table.
AI is very good at answering the question asked. A good financial planner will first check whether the right question is being asked.
“Which fund has given the highest return recently?” is not the same as “Which fund is suitable for my goal?”
“How much overlap is there?” is not the same as “Is this overlap harmful in my overall portfolio?”
“Why is my portfolio not the best performer this year?” is not the same as “Is my long-term financial plan on track?”
To use AI wisely, we should understand one basic point. AI does not know your financial life the way a financial planner gradually understands it through conversations, documents, family details, goals and past behaviour.
AI works from the information given to it. It reads your prompt, connects it with patterns from its training and available sources, and then produces the most likely answer – all this at a lightning speed which makes it look impressive, which is not always the same as the right answer in your case.
That is why the answer depends heavily on the question. Ask the same question just a bit differently, and you may get a different answer. Ask another AI model, and you may get another conclusion.
Even in the same chat, ask the AI, “What could be wrong with your answer?” or “Give me the opposite view,” and it may substantially modify what it said earlier without batting an eyelid!
This does not make AI bad. It only means AI should be treated as a starting point, not as a final verdict.
In money matters, the biggest mistakes are often not mathematical mistakes. They are suitability mistakes.
A product may be good in general and still wrong for you. A fund may be popular and still unsuitable for your goal. A strategy may work for a young investor and fail for someone near retirement. A portfolio may look conservative to one family and risky to another.
Therefore, my suggestion is simple. Use AI, but use it wisely.
If an AI output worries you, please share it with us. Also share the full output and, as far as possible, the exact question you asked. Without that, we may be responding to a conclusion without knowing what information was given and what was missing.
Before accepting an AI answer, ask it four more questions:
- “What important information is missing from my question?”
- “Why could this answer be wrong for my situation?”
- “Give me the opposite view also.”
- “Would your answer change if my goal is three years away, ten years away, or meant for retirement income?”
These questions will make the AI response more balanced. This will also help you have a more meaningful discussion with your financial planner.
At Hum Fauji Initiatives, we welcome informed clients. However, the purpose of questions should be better understanding, not unnecessary fear.
AI can help you read your portfolio better. It can help you ask sharper questions. It can even point out something that deserves review.
But it cannot automatically know the full story behind your money, your family, your future, your life…
Use AI as a learning tool, a question generator and a second-opinion assistant. But before making any decision that affects your family’s financial life, bring the question back into the full context of your financial plan.
The better use of AI is not to ask, “What should I do immediately?” It is to ask, “What should I understand better before I decide?”
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