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Stocks and Shares ISA time again, with the April 5 deadline now just two months away. Even if investors can’t afford the full £20,000 contribution limit, it’s worth getting as far as possible. Then get an early start on next year’s ISA.
I personally own about 20 spreads FTSE 100 again FTSE 250 shares, but I wondered what I would do if I started from scratch. So I called artificial intelligence. To be clear, I will never use AI to pick real stocks for real money. It makes too many mistakes and lacks accountability. Still, I was curious.
NatWest shares tempt me
The chatbot made a strong start with the FTSE 100 stocks I was looking at myself: NatWest Group (LSE: NWG). Your thinking? “This UK-focused retail bank has a growing interest rate and is improving profitability after years of weakness. Profits are steadily rising.”
While past performance isn’t everything, NatWest has been blindsided. Its shares are up 63% for the year and 315% over five years. That makes me wary though. Stock performance can run in cycles, and FTSE banks have been flying all over the place recently. Despite that, NatWest is relatively cheap, with a price-to-earnings ratio (P/E) of 13.2. The trailing dividend yield fell to around 3% after the share price surge, but forecasts suggest 4.6% in 2025 and 5% in 2026.
There are risks, as always. NatWest is highly exposed to the UK economy, which is struggling, and falling interest rates could squeeze margins and increase impairment costs. In my real portfolio, I hold Lloyds Banking Groupwith a similar profile focused on the UK. Buying NatWest feels like doubling down. Some investors may look at it as their ISAs, but they should accept shares that may move slowly after their stellar run.
The following is National GridAI describes it as “protective aid with fixed income”. A popular portfolio structure with a strong history of share price and dividend growth. Personally, I won’t buy it, as I’m worried that the tens of billions needed for the green energy transition could go into dividends. Many of my fellow writers on The Motley Fool disagree though.
More diversity is needed
ChatGPT also adds two more basics to the portfolio: British American cigars again Lloyds Banking Group. Big Tobacco isn’t for everyone, but this FTSE 100 star still sells hundreds of millions of cigarettes every year and has increased profits every year for the millennium. Vapes are a new opportunity, although regulators can pose a risk here as well. The trailing yield is a nice 5.3%, but shares may slow after a strong run.
As I said, Lloyds is a stock I already own, and hope to do so for life. Its shares are up a staggering 85% year-to-date, but with a P/E rising to 16, it should definitely lower at some point.
At my request, ChatGPT selected FTSE 250 stocksBaillie Gifford US Growth Trustan investment trust focused on high-growth US companies, including technology and other unlisted exposures. It’s worth considering, but I’d rather use a cheap tracker to gain exposure to Wall Street, than use active managers.
A selection of five ChatGPT stocks is not a bad start. But two UK-focused banks in a five-share portfolio? That’s a lot of concentration. As always, investors should do their own research and make their own decisions.
