Recent stock market volatility could be a good opportunity for long-term investors to fill up a Self-Invested Personal Pension, or SIPP.
Pension investing is a long-term game. Loading up on shares when prices are down like today may be the perfect time to start, for those who can withstand short-term risks.
With that in mind, I decided to have a bit of fun by asking ChatGPT to name five FTSE 100 stocks to create the perfect SIPP. I asked to spread my risk across five different sectors, to avoid doubling up.
Unilever is a defensive stock
I should start by saying that ChatGPT is not a stock picker or adviser. It just hoovers up other people’s opinions from the web, and must be approached with caution.
It played safe by coming up with five of the biggest UK blue-chip shares. While all are worth considering, at least three are far riskier than ChatGPT made out.
The first pick was consumer goods specialist Unilever (LSE: ULVR), which owns a portfolio of household name brands, including Dove, Hellmann’s, and Ben & Jerry’s, that people keep buying in good times and bad.
“It’s highly cash generative and pays a consistent dividend”, ChatGPT purrs, adding, “Global reach and brand power mean it can pass on inflation through price increases”.
The Unilever share price has dipped 3% in the last month, but that’s pretty decent given today’s market volatility. Over 12 months, it’s up almost 20%. The trailing yield is 3.2%.
Unilever lost its way as the group became too sprawling, while the cost-of-living crisis squeezed consumers and drove up input costs. ChatGPT didn’t mention that. Investors must do their own research before buying, and see what human experts have to say.
Its second pick was financial services firm Legal & General Group, which now boasts a bumper trailing 9.25% yield.
My robot buddy neglected to mention that long-time share price performance has been poor. Personally, I would favour more sure-footed rival Aviva.
Next, ChatGPT picked electricity and gas infrastructure operator National Grid, highlighting its regulated earnings and reliable dividend yield.
These FTSE 100 have hidden risks
It claimed the utility “has growth potential from investing in clean energy infrastructure“, neglecting to mention that it must invest tens of billions to get there. Last year, it called on investors for more cash. Personally, I wouldn’t buy it (despite that juicy 5.6% yield).
My bot bro’s next pick is high on the risk scale: spirits giant Diageo. It shares are down 30% over one year and 50% over three.
While ChatGPT points to its “strong margins and pricing power in the premium drinks segment”, it doesn’t mention Diageo’s profit warnings or that young people are drinking less alcohol. Buyer beware here – don’t blindly follow the robots.
The final pick is oil giant BP, which ChatGPT claims is “investing heavily in renewables to future-proof the business as the energy landscape evolves”.
That’s plain wrong. BP has just dumped net zero plans to focus on fossil fuels. ChatGPT also claims BP remains “a cash machine“, but I fear share buybacks and dividends will slide from here as oil prices slide.
Like every stock, all five listed here have pros and cons. A quick search on ChatGPT isn’t enough. I’ll continue to research my own stocks, rather than relying on robots.
