News & INSIGHTS
Look Out! Here It Comes (Again) – The Next Big Investing Trend
By Patrick Swift, CFP®
During my daily commute, I’m listening to one of my frequent podcasts on business and wealth management, and the hosts are exclaiming (!) the wonderous power of Chat GPT.
I get to the office and pop open my email for the day and fresh at the top of my inbox I see: “PLEASE JOIN US…” for some exclusive webinar with an uber-accomplished investment mind on the ins and outs, threats and opportunities, of the brand-new AI era we are on the cusp of.
Throughout the day, in one or two of perhaps ten conversations with various clients, some of whom have careers in the enterprise software or tech industries, there are mentions of these new chat bots, and what their new capabilities mean for them, society, and business.
And on my way home, I pop on a different genre of podcast, to give myself a break from work-like topics, and Lex Friedman (MIT genius on AI) is the guest of the episode.
Yes, I think we have found it, the next big thing – and we are in the early innings (at least from my perspective) of the ‘AI-ification’ of our society’s zeitgeist.
What this article is not: a disgruntled and/or misplaced opinion of AI’s effect on my own personal life and career. Nor is it an attempt to downplay any future disruption, threats, or opportunities that come from these new developments. In fact, those all could be quite significant.
What it is an attempt to be: a reminder that not all shiny things require your attention, and even fewer require a share of your wallet or investment portfolio.
From a wealth management advisor’s perspective, I am witnessing what I think is the emergence of a topic that I’ll soon receive questions about in nine or ten out of ten conversations, instead of just one or two.
Why? Because as human beings, as investors, our actions are significantly influenced by our emotions, unlike our new robotic counterparts.
What follows the current phase is an inevitable evolution: the fear of missing out. The fear of being left behind. The fear of – if everyone else is doing this, I need to be too, right?
And you know what? There’s good reason for that. I don’t blame people for thinking like that.
We have already begun to see BIG businesses paying attention to this new technology.
Google and Microsoft are rushing to the table to get ahead. And their stock prices will undoubtedly swing in outsized directions (both ways) as traders and investors play their best hand at guessing how these trends will impact these companies’ future earnings and market positioning.
They aren’t the only ones – there will be publicly traded and private companies (and maybe even governments) that will enter and fade out of our day-to-day discussions, new apps to facilitate our ability to interface with the technology, and “professional investors” from Wall Street to Silicon Valley who will raise and deploy capital to participate in the trend.
And why is that?
Because no one knows what will happen. And until we do, outsized risks AND opportunities exist. And guessing correctly at those outcomes, while attractive, is not just difficult, it’s near impossible. It’s speculating, it’s akin to a gamble. So, markets will reflect just that.
In the meantime, there will be mistakes made by both individuals and institutions. There will be more mistakes than successes.
Your financial goals don’t need to be one of them.
Can we not learn lessons from our past? Though I characterize myself as an optimist, research and experience makes me think otherwise. Look no further than the most recent year, 2022, when excesses and speculative bets in markets came crashing down. The most recent “big thing” received its biggest gut punch yet – cryptocurrencies, NFTs, the metaverse, and all the correlated investment darlings were lambasted. We got fooled again. The ‘get-rich-quick,’ the ‘can’t-miss investment,’ the ‘look-at-all-the-smart-people-involved-and-running-things,’ theme turned out to be a really painful experience for both individuals and institutions alike.
Didn’t we all see it coming? All the bubble-mentality boxes were checked! Except for the one that’s only available to check after the fact: hindsight.
Now, for the stoic, disciplined, diversified investor – they lost money too last year. Not quite as much, but they (hopefully) have what the speculators do not: a calmness and stillness to their investment portfolios and approach. Their future financial goals are not in question because of one lousy year. They don’t need to guess at their decisions: Do I dump this? Do I buy this one back? How do I make up these losses as quickly as possible? What should I do, and when?
I often say to clients: make decisions from a position of strength, and let’s minimize future regret when assessing our decisions today.
What has always worked well in the past, in my opinion, will continue to be what will work in the future. To achieve financial success:
- Save more than you spend.
- Once your short-term goals are funded, invest your money in long-term diversified portfolios of assets that have demonstrated a history of achieving the returns your goals require.
- Rebalance those portfolios on a regular cadence.
- Don’t make knee jerk changes or react to the current apocalypse or opportunity de jour.
And when the inevitable FOMO comes, and you can’t avoid the topic no matter where you are – find some comfort in your own disciplined and time-tested approach.
And if there is an itch so great that you can’t resist scratching – fine, go ahead and scratch it, but be sure to right-size that itch. Contain your risk to an amount that you are willing to lose 100% of. Make decisions with your money that you can live with. Minimize future regret.
I have no idea if ChatGPT and related technologies will displace everything we know. Who knows – maybe this article would be more effective if I prompted ChatGPT to generate it?
What I do know are the symptoms of a trend: if all your friends and colleagues are talking about it, if all the industry leaders and experts are hosting lectures and events, if your social and mainstream media feeds are filled with it, if even my most disciplined clients are asking me questions – if it looks and smells like the next big investing fad, it probably is.
Besides, if you are a diversified index investor, that’s one of the beautiful parts about indexes: as companies grow and displace others, the indexes will snap them up in favor of those displaced. The law of creative destruction – you don’t have to get it right; just sit tight. Minimize regret. Stay in the fight, don’t punch yourself out.
If you have an itch that you struggle not scratching – give us a call, we’ll get you on the right track.