The world moves quickly and I’m always trying to stay on top of the techniques, tools, and trends available in the world of personal finance. Here are a few that caught my eye recently, along with some of my initial thoughts.
AI-Driven Investment Funds or Allocation Strategies
Artificial intelligence is all the rage right now and it didn’t take long for folks to speculate that we would soon be seeing AI-controlled investment funds and allocation solutions. On the surface it would seem that using AI to pick and choose stocks or allocation for your investments is a great application, but when you dive into the weeds it’s proving trickier than people thought. AI is great at working on problems that have large datasets and relatively consistent outcomes. The markets have massive data sets, but NOT predictable outcomes. I believe that AI might assist portfolio managers in their quest for performance alpha in the future, but a pure AI-driven investment platform with no human influence seems far away today.
Envelope-Based Budgeting
What’s old is new again! Many Gen-Zers, burnt out by technology and tired of the credit card drain, are turning back the clock and going analog with their budgeting. Envelope-based budgeting is when you fill different envelopes with the cash you’ve allotted for that expenditure at the beginning of each month and then only use the cash you’ve allotted. This technique was very popular pre-credit cards and is still endorsed by personal finance guru Dave Ramsey. It stands in direct contrast to that vague and opaque “Amazon” category that shows up in your monthly totals. There is a simplicity to this technique that reduces stress and ambiguity over the budget. For folks struggling to make a budget work, I’m a strong advocate of this method and the discipline and peace of mind it creates.
Alternative Investments
Private equity and private real estate are great options for folks that meet the steep “qualified investor” credentials, which require a high income or net worth. Such restrictions make those areas of the investable universe off limits to most American families. In the digital age, several creative solutions have cropped up to give ordinary affluent people access to illiquid and diversified investments that could offer a higher rate of return than traditional publicly traded bonds and stocks. Cryptocurrency is obviously the most popular, but peer-to-peer lending, crowd-sourced real estate funds, and friends and family venture capital investing have become increasingly mainstream. All of these options enhance diversification and offer potentially higher returns at the cost of liquidity and increased assumption of risk. Investors be warned, as most of these are not professionally managed and put the onus on the investor to do their homework on the asset class, space, and investment. With that warning in mind, many of these investments have produced reasonable returns in their earliest years.
I’m always trying to stay on top of the innovations in finance and apply a fundamental common-sense approach to their efficacy. It’s important to note that none of the tools or trends discussed above are one-size-fits-all, but some may make sense for your individual financial situation. Let’s keep the conversation going as your team at Curi RMB Capital works constantly to provide advice on how best to safeguard and grow your money.
The opinions and analyses expressed in this newsletter are based on Curi RMB Capital, LLC’s (“Curi RMB”) research and professional experience are expressed as of the date of our mailing of this newsletter. Certain information expressed represents an assessment at a specific point in time and is not intended to be a forecast or guarantee of future results, nor is it intended to speak to any future time periods. Curi RMB makes no warranty or representation, express or implied, nor does Curi RMB accept any liability, with respect to the information and data set forth herein, and Curi RMB specifically disclaims any duty to update any of the information and data contained in this newsletter. The information and data in this newsletter does not constitute legal, tax, accounting, investment or other professional advice. Returns are presented net of fees. An investment cannot be made directly in an index. The index data assumes reinvestment of all income and does not bear fees, taxes, or transaction costs. The investment strategy and types of securities held by the comparison index may be substantially different from the investment strategy and types of securities held by your account. RMB Asset Management is a division of Curi RMB Capital.
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