DEPENDING on the context of whichever serious "AI" conversation I may be engaging in during my consistently long workweeks, I might be referring to artificial intelligence, active income, or alternative investments.
I often slide into using time-saving abbreviations without thinking. So, I must be proactively focused on the person or groups of people I'm addressing to be sure "transmission" and "reception" are aligned. I need those who are listening to understand which version of AI I am referring to at any point.
For most of us, our financial house is built over a working lifetime of earning active income. That type of income stands in diametric opposition to passive income or PI.
Our active income flows into our lives through salary-providing jobs or revenue-generating businesses or both. In contrast, our passive income usually flows into our bank accounts in the form of interest or profits from cash savings, dividends from the Employees Provident Fund and stocks, cash distributions from income-focused unit trust funds, and rental proceeds from investment real estate.
Unless we properly manage our active income and general expenses, we won't generate consistent monthly cash flow surpluses to save and invest for two overarching portfolio goals: capital gains and passive income, or in shorthand, CG and PI.
When we save and invest, we would be wise to do so using three, four or five distinct asset classes from a superset of five such useful classes:
1. Cash
2. Fixed income
3. Equities
4. Investment real estate
5. Alternative investments
You'll note that asset class number 5, alternative investments, abbreviates to AI, which adds to the ambiguity I have referenced.
ALTERNATIVE INVESTMENTS
Briefly, alternative investments, French IT and wealth management consultancy Capgemini, in its World Wealth Report 2024, defines alternative investments as commodities, currencies (forex), private equity (PE), hedge funds, structured products, and digital assets.
The advantage of this form of AI is that those six different asset segments within this fascinating asset class tend to behave differently from equities and fixed income. This improves the wealth protection afforded to investors like us by diversification.
In case you're interested, within this AI space, my favourite segment is commodities because they represent the stuff of life. Human civilisation is built upon the utilisation of commodities. (Incidentally, my least favoured AI asset segment comprises digital assets; I am immensely anti crypto — so do feel free to call me a dinosaur.)
Now, to access the latest Capgemini World Wealth Report, visit www.worldwealthreport.com/, register and then download the free PDF file. In the foreword of this current iteration, Anirban Bose, chief executive officer of Capgemini's Financial Services Strategic Business Unit, wrote:
"Like in all other sectors, artificial intelligence (AI) is fast emerging as a transformative force to enhance client intimacy in wealth management."
While I often trumpet my seasoned "dinosaur status" proudly, and even though I am leery of all things crypto, when it comes to artificial intelligence, I realise that those changes are here to stay and ever accelerating.
The strengthening confluence of robotics and this version of AI will transform the landscape of work in the years ahead. My own back-of-the-envelope calculations suggest that as many as a billion human jobs will disappear by 2050 because of the proliferation of AI-driven robots and computer systems.
This is great news for planetary wealth that grows with economic productivity, but bad news for those who don't know how to tap into the global capital market.
What can we do to protect our ability to earn AI (active income)? Keep learning on the job. Also, ironically, familiarise yourself with our currently rudimentary AI tools such as OpenAI's ChatGPT, Google's Gemini, and Microsoft's Copilot.
WORK HARD/WORK SMART
What I will not do is use an AI tool to write text for me because I will not risk diluting my written "voice", which has been a major part of my rice bowl for the last 34 years — ever since my first paid writing gig with Malaysian Business magazine in 1990. Nonetheless, there are countless tedious aspects of work that AI tools can radically improve for us.
In the decades ahead, those of us who retain our ability to earn AI (active income) so we have money to manage — and then to save and invest a portion in a diversified portfolio that may or may not contain AI (alternative investments) — will be in better shape to build a robust financial life for our families and ourselves.
Beware:
With each passing year, the threats posed by AI (artificial intelligence) to our economic well-being will rise. Yet we can't stuff the genie back in the bottle. At best, like Aladdin, we should try to work with the genie of AI (you know which one) to prosper.
So, work hard and work smart to increase your AI (active income); as you do so, also save and invest in different asset classes including but not exclusively AI (alternative investments).
Your goal should be to create a gushing stream of PI long before your own rice bowl comes under threat from workplace changes fuelled by the you-know-which version of AI. Deal?
© 2024 Rajen Devadason
Rajen Devadason, CFP, is a securities commission-licensed Financial Planner, professional speaker and author. Read his free articles at www.FreeCoolArticles.com; he may be connected with on LinkedIn at www.linkedin.com/in/rajendevadason, or via rajen@RajenDevadason.com. You may also follow him on Twitter @Rajen Devadason and on YouTube (Rajen Devadason).