Is AI a "smart" investment?
Lately, you may have seen reports related to AI, Artificial Intelligence. You may have even read articles that were written using AI. And it is possible that you communicated with AI online using ChatGPT. Many analysts believe that AI is going to change our lives even more than the internet has.
At Sommers Financial Management, we are asked two questions. First, should I have a higher allocation of my investments in AI related stocks? Second, does Sommers Financial Management use or intend to use AI to manage my accounts?
For us, both questions are easy to answer. Our investment philosophy is rooted in having a broad allocation to global stocks, US Treasury bonds, real estate, gold, commodities and alternative investments. While we agree with many analysts that AI is going to continue to experience strong growth in the years to come, we invest in broadly diversified portfolios using low-cost ETFs in order to capture small growing companies as well as the largest and strongest companies.
As AI-related companies grow they have been and will continue to be part of these indexes. And companies in these indexes that may not be focused on AI will likely use AI to become even more effective.
As for the first question, we don’t believe that investors require a higher portfolio allocation to AI-based companies because it is going to happen naturally by owning low-cost ETFs with exposure to the S&P 500 (U.S. large companies), the S&P 600 (U.S. small companies), as well as International and Emerging Market stock indices. The ETFs we use that encompass AI-related stocks are referenced in parentheses in the gray box.
To answer the second question, we are not currently using AI to manage any accounts—or even to help write our newsletter articles or blog posts. Will we do so in the future? We would consider it if we believed it was in our clients’ best interest, but we are not there yet.
“HAL 9000 wouldn’t you agree?” (Just a joke, HAL 9000 is not real and thus did not consult on this article.)