ChatGPT Plus
In 1967, Texas Instruments (TXN) created the first handheld electronic calculator and changed the way that mathematicians crunch numbers. In 2022, OpenAI introduced ChatGPT and might have done the same for writers, engineers, and dozens of other professions.
ChatGPT, the buzzy AI chatbot backed by Microsoft (MSFT), is the result of a decade of research. It’s so powerful that it could disrupt some of the internet’s most established features, such as search engines or email. The chatbot has been free since it launched last November. Now, OpenAI is testing the waters with a paid plan: ChatGPT Plus.
What’s Included?
For $20 per month, ChatGPT Plus offers users 24/7 access to the tool, faster responses to queries, and first access to new features. ChatGPT has been so wildly popular that it often gets overwhelmed with queries. With the Plus plan, OpenAI can prioritize its most loyal users and make sure service never goes down for them.
The free version of ChatGPT will remain available, but only to a limited number of users during high-demand peak hours. OpenAI will test its premium plan with US users and begin rollout in the coming weeks. It plans to eventually expand the service to other countries.
Recouping the Cost
For OpenAI’s monetization model, ChatGPT Plus is likely just the tip of the iceberg. The tool is incredibly expensive to run, and that doesn’t even include the money spent over the past decade to build it.
OpenAI’s CEO Sam Altman stated the company spends “single-digit cents” whenever it responds to a query. When processing millions of queries per day, cents add up. The new subscription service is a way for the company to offset its costs while it continues to fine-tune the tool and incorporate feedback from the testing phase.
With that in mind, before you shell out $20, consider that ChatGPT remains imperfect in its current state. If you use ChatGPT for work or fun, you may want to double-check its outputs — even if you’re paying the premium.
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This article originally appeared on SoFi.com and was syndicated by MediaFeed.org.
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Should I trust a robot to invest for me?
We’ve all seen the movies where robots try to take over the world disguised as humans, use humans as living batteries, smooth-talk red lights, or try to jettison astronauts into outer space.
And this might lead you to question whether robots have your best interest in mind. Yet, far from the drama of Hollywood, robo-investing — which provides investment advice and management with limited human intervention — can be a useful, low-cost financial tool to help you reach your goals.
Related: Robo advisor vs. financial advisor: Which should you choose?
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Traditionally, an investment advisor would work with you to build an investment portfolio, helping you choose an allocation of stocks, bonds and other investments, and periodically rebalance them as the market and your needs change. All of this human interaction makes traditional investment advising fairly pricey.
A robo-advisor, on the other hand, uses computer algorithms to build and manage your investment portfolio — often using low cost index and exchange-traded funds — with limited human interaction.
Cut out the human managers and the price for investment services goes down considerably. In part due to their low cost, robo-advisors are becoming increasingly popular. In 2017, robo advisors passed the $200 billion mark in aggregate assets under management, and that number is likely to keep growing.
What’s more, many robo-advisers may offer low or no investment minimums, which means you can start investing any time.
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Some robo-advisors charge fees on a per-trade basis, while some charge fees based on a percentage of your portfolio value. While traditional advisors typically charge a fee of around 1% of assets under management, robo-advisors’ fees range from 0% to 0.89% with fees typically hovering around 0.25% to 0.30%.
The fees charged by robo-advisors are important to pay attention to even if they seem low. Consider that a 0.25% fee reduces an annual return of 7% to 6.75%. This reduction may not seem like much, but over the course of many years, these fees start to add up.
Additionally, the use of low-cost index funds and exchange-traded funds tend to drive the cost savings even higher. In 2017, the average expense ratio of a passive investment (such as an exchange-traded fund) was .15% compared to the average expense ratio of .72% for actively managed funds.
When you add these two components up, the average robo-advisor using passive investments could be 1.32% less per year than the average human advisor using actively managed funds. As balances grow over time this can have a fairly substantial impact.
This is all to say you should carefully weigh fee options against the services different robo-advisors offer to make sure that the fees you are paying are worth it to you. For example, a slightly higher fee might give you access to a human financial advisor who can offer you investment advice. If that kind of service is important to you, it might be worth paying a little bit extra.
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Aside from the fees you’ll pay, there are a number of other factors worth considering when you’re deciding whether a robo-advisor is right for you, including:
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Most robo-advisors use a mix of ETFs and low-cost index funds. ETFs hold a basket of stocks or bonds and are built to mirror an index, such as the S&P 500. They are traded throughout the day. Index funds are mutual funds that also hold a mix of investments and track an index.
Mutual funds only trade once per day. Both types of investments are more diversified than an individual stock because of the basket of assets that they hold. When choosing a robo-advisor make sure that they offer the types of investments that you want to include in your portfolio.
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You’ll typically be offered two broad types of accounts when you consider a robo-advisor: a retirement account or a regular taxable investment account. A standard investment account has no limits on the amount of money you can invest.
Retirement accounts, such as IRAs and 401(k)s offer specific tax advantages.
Be clear about your goals when you choose your account type. If you’re saving for retirement, the tax advantages of retirement accounts are hard to beat.
But if you’ll need access to the money sooner than that, consider a regular taxable account. You don’t want to be slammed with the early withdrawal penalties that come with dipping into retirement accounts too early.
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Robo-advisors usually offer a fixed number of portfolio options designed to cover various levels of risk. The robo-advisor will typically recommend one of these portfolios based on your goals, investment preferences, comfort with risk and time horizon. Robo-advisors will usually match you with a portfolio by giving you a questionnaire.
This questionnaire doesn’t lock into a portfolio, so you might be able to override the default selection to choose a portfolio of your choice.
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Once you’ve signed up for an account with a robo-advisor, you will typically be offered a range of automated services.
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Based on the process described above, let’s assume you were placed in an allocation that consists of a mix of 60% stocks and 40% bonds. Over time this allocation will likely shift a bit as investments fluctuate based on the movement of the market.
For example, the stock market may grow faster during a particular period of time than the rest of your portfolio. Rebalancing helps you buy and sell assets to realign the investments inside your portfolio to the desired allocation.
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Many robo-advisors make it easy to establish sound financial habits, such as ongoing saving, by establishing recurring contributions. A common example of recurring contributions is in an employer sponsored plan such as a 401k. The value of recurring contributions is that it automates the tough decision of saving for the future. This strategy is not just limited to your 401k, and might help you be more disciplined with your other accounts.
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Some robo-advisors combine the cost-effectiveness of technology with the expertise of humans by offering access to financial professionals. This hybrid approach might enable investors to ask questions, discuss goals and plan for the future. Robo-advisors might charge for this service, but it tends to be optional if it is offered.
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There are some potential drawbacks to the one-size-fits-all approach of robo-advisors.
Those interested in investing in complicated assets, such as real estate investments or trusts, may want to look to professionals for help doing so.
That said, robo-advisors can be a great financial tool, especially for those who are just starting out investing and who don’t have complicated investment needs.
For example, Millennials who are still accumulating assets may find that robo-advisors are a good fit. The low cost of robo-advising has lowered the barrier to entry for many investors, giving them access to tools once reserved for higher-net-worth individuals.
This article originally appeared on SoFi.com and was syndicated by MediaFeed.org.
Learn more:
- What does a wealth management advisor do & how can they help you?
- What exactly is an automated advisor?
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