How Can I Invest in the Future of Artificial Intelligence?
You may have read a technology article, or perhaps your work involves some sort of artificial intelligence component, perhaps you have been looking at trends in the workforce and wondering whether your industry will someday be replaced or shrink due to use of robotics and artificial intelligence. In recent years there has been a growing notion that at some point that the landscape of the workforce will change. Many industries could be replaced or shrink the workforce due to use of machines, robotics, and artificial intelligence. We have seen since the 1990’s how rapidly technological advances can occur and the radical changes they can make. Therefore these seem to be legitimate concerns and it seems to be an area of opportunity for investors who have foresight and are looking to profit from the long term trend (in my humble opinion of course).
One way to invest in this trend is through an exchange traded fund by the ticker symbol (BOTZ) Global X Robotics and Artificial Intelligence ETF. This ETF has over $2.44 Billion in assets. The investment seeks to provide investment results that correspond generally to the price and yield performance, before fees and expenses, of the Indxx Global Robotics & Artificial Intelligence Thematic Index. The fund invests at least 80% of its total assets in the securities of the underlying index. The underlying index is designed to provide exposure to exchange-listed companies in developed markets that are involved in the development of robotics and/or artificial intelligence as defined by Indxx, the provider of the underlying index. The fund is non-diversified. Additionally, as with other ETF’s there is a maintenance fee of .68% here (which is in line with other similar ETF’s; also please note that ETF fees are typically lower than corresponding mutual fund fees). As you know, fees are an important consideration for any potential investment involving ETF’s or mutual funds and should always be considered. Overall, BOTZ seems to be a great low cost investment to speculate on the future, or growing trend of robotics and artificial intelligence.
First of all, it’s one of the cheaper top 20 coins (those with the highest market caps). Is this a great reason to buy either a coin or a stock? No, as whether something is truly cheap in relation to its competitors must be based upon some underlying rationale such as it having a lower PE ratio, etc. Here there does not appear to be any such rationale. In fact the opposite may be true, as the overall market cap for TRX is around $3-4 billion at these prices, Meaning if you believe that the overall market cap cannot or will not exceed that of Bitcoin (the coin with the biggest market cap) TRX may not have much room to run from its present .038 or so, possibly to $1, maybe $2 if the market really heats up. However, based upon the fact that there has been much irrational exuberance surrounding the overall cryptocurrency market fairly recently (within only the last few months; with Bitcoin hitting a high of over $19,000 in December 2017) I think there is a good chance that TRX could make a bit of a run if the overall market goes on another run up possibly to $1-2 and maybe more. I can’t provide a specific target, but it previously hit a high of around $.36 cents and I believe it will exceed that target at some point in the next year or two, should the overall market run up.
Second, TRX has many upcoming possible catalysts including its Beta test launch, release of its Main net, and a coin burn (the effect of which is unknown) coming up at the end of March and May 2018. These potential catalysts provide potential investors with a huge potential opportunity to profit. Is there downside potentially? Yes, it is possible that TRX could go down as it was in fact much lower a year ago (it has run up in excess of 1,000% this past year). However, my personal opinion is that if the overall market heads up, TRX has the potential catalysts in place to send it flying much higher, and I believe it’s worth risking a few thousand dollars. $3,080 the other day would have bought 100,000 coins. Meaning you would then have $50,000 if the price of the coin went to $.50 (remember this shot up to $.36 in December briefly). To me, that seems to be an acceptable risk to reward ratio.
Finally, of all the coins out there, TRX is the one created and run by Justin Sun, a protege of Jack Ma (Alibaba Founder and Billionaire). Justin Sun has previously created and runs PeiWoo, a successful online venture with over 10,000,000 users and has a huge support base. His track record of success and his dedication to this company so far, along with the investment in talented internet professionals who are working on development of the underlying technology makes me feel this is a better investment than many of the no name coins out there which are simply trying to take advantage of the irrational exuberance surrounding bitcoin (those with no technological background or track record for success). Why would anyone invest in those coins? I find it hard to understand. I do however, think that Justin Sun, can and will produce something favorable for investors here and is dedicated to this company.
TRX is a risky, speculative investment, as is any other cryptocurrency (there are regulatory risks, etc.). However, within the overall cryptocurrency market it is an excellent choice, run by a founder with a successful track record in the technological arena. It also has many positive catalysts coming up which in favorable market conditions will send this coin much higher. I have purchased at various stages with an overall price of .075 cents. at present the price is at .0478. The overall risk to reward seems acceptable to me and I believe it is worth the risk for anyone willing to make a bet and potentially lose a few thousand, there is a decent chance of profiting well in excess of the money invested here.
The simple answer is that i am attempting to go for excessive returns and have made the decision to take on the risk that one losing investment could wipe out a significant portion of my investments. My rationale being that even if I lost everything I have sufficient income to replace what is lost and sufficient time prior to retirement where i can still go back, replace losses, invest in a safer/diversified manner and end up with a sufficient amount to retire well. Without this I would never take on the levels of risk that I do.
What is Diversification?
Diversification is the process of spreading out your investments into various asset classes and sectors and spreading them among investments even within the same asset classes or sectors as well to ensure your portfolio is not subject to too much risk of loss from any one investment. The idea is to lessen the risk of one bad investment wiping out or depleting a significant portion of your assets. Diversification reduces risk (of exposure to significant loss from any one investment). Thus this increases your chances of having a successful long term investment returns as opposed to losses. Diversification is always recommended and is one of the bedrock financial principles that financial advisors will recommend. They do so for good reason. Most individuals don’t want to risk losing there entire portfolio from one bad investment and feel they could not recover from the same.
What is My Risk Tolerance?
People also have very different levels of risk tolerance (meaning the amount of ups and downs in the market they can handle). Some have very minimal risk tolerance (and would be extremely upset with any dip 1%, 3%, etc. Others, such as myself, can handle dips of as much as 20-30% or more without losing any sleep. Its not that I like the feeling of losing money, i just think about things differently. If I choose to invest in something, its because I believe in it and understand the risks involved. I know ahead of time what the possibilities are and what I am willing to risk. This makes me extremely comfortable. Yes, sometimes I get upset if things aren’t going my way, but i do not panic as I knew this was a possibility and don’t risk more than I’m willing to lose. What is your risk tolerance? This is something to think about before ever investing a dime. You don’t want your emotions throwing off your entire investment plan and causing you to make sudden and harsh decisions that could affect you for a long time to come. For example, within the last two years I owned over $100,000 worth of SWKS stock, and watched it dip down to $60/share from a high of $113/share. i held because this is a long term investment, which i want to grow over time. Had i panicked and sold at $60 I would have lost a good amount of money. instead, I held on, took my dividend in the meantime, bought more while it was lower, and still own these shares which again recently traded as high as $115/share and have paid another dividend since the big dip.
What Happens if I Don’t Diversify My Investments? At this point in my life I personally choose not to diversify my investments. I hold for periods of time, heavily concentrated positions with the belief and hope that the investments will go the way I want. This is a very risky proposition at times due to the heavy concentration where one bad investment could create a substantial loss for my overall portfolio. However, I am aware of these risks and yet i continue to do so….Why? i am not at the level of wealth I want to be at. i have used financial calculators and estimated how much wealth i could have in 30 years from putting away a certain amount each month and investing at the historical rate of return 7% of the stock market. In doing so, I have seen that this plan could net me a significant amount of long term wealth and I will have financial security, it results in quite a bit of money. However, this is not the story I have painted for myself and i am at a point in my life where I make a good amount of money and feel that I am willing to take on more risk of loss in the present (for at least a few years, as much as the next 5 years or so) to attempt to achieve higher than normal returns on my investments. Once i attain a certain level of wealth (if I am able to do so) I plan to allocate or diversify some to push more of the wealth toward a safer and less volatile method of wealth building.
To support my position on wealth building by going against traditional diversification advice, I must point out that one notable, famous investor, Warren Buffet who is considering one of the world’s premier investors, has for many years gone against traditional investment advice, sometimes having as few as a couple of investments with billions invested in each. Warren Buffet has also been confident in himself and his investments and their long term potential, never worrying about the ups and downs and only focusing on the value he saw in the underlying companies (basically indicating to ignore market fluctuations if you own a quality company and know there is value there, the value will eventually come through to the stock price). That being said, Warren Buffet is a smart guy and as a value investor, does not buy companies which are not solid financial investments. He has been known at this point to make some very shrewd deals, including getting government guarantees on his financial investments during the financial collapse around 9 years ago to invest in and support the rehabilitation of a large well known financial institution.
Examples of What Could Happen With and Without Diversification
To illustrate, mutual funds are typically considered to be diversified investments, although for true diversification you would need to invest across various asset classes to reduce risk of any one area harming your overall portfolio significantly. However, using the mutual fund example, let’s say a typical mutual fund in a great year makes 25%, with a downside risk of 15% tops. in a bull market, investor A buys $10,000 worth of a Mutual Fund and makes 25%, he then makes 15% the next year, and 20% the third year as the bull market rages on. He started with $10,000 and now has $17.250 after 3 years. Quite a return and he/she is extremely thrilled. As he was well diversified he was risking a downside of at most several thousand dollars a year and has achieved a significant return, almost doubling his money. Now let’s look at a more risky investor, Investor B buys $10,000 worth of GBTC the bitcoin ETF this year. This is an extremely volatile investment which some say will go to $0, others say will double this year. investor B gains 100% in year 1, gains 40% in year 2 and gains 50% in year 3 and ends up with $42,000. These are fairly extreme examples, but quite possible if one invests a substantial amount of money in one growth stock for a period of 3 years. However, the risk of losing the money for investor B is much greater as well. Growth stocks and GBTC for example, could lose value of as much as 80% or more in a matter of months or a year. If you took the example of investor B and had him/her lose 80% in year 2, the portfolio would have been down to $4,000 (even after being at $20,000 the year before) and only $6,000 at the end of year 3 despite having a 50% return that year. As you can see, more risk equals more potential for higher returns, but also more potential for higher losses. You have to be willing to lose money to invest that way.
My Risk Tolerance
I presently own a large stake in Skyworks Solutions over $100,000. Could it falter? yes. Could it go much higher? I believe so. Am I willing to take the risk? Yes, as i believe it is a good company in a good market with lots of growth potential and can withstand the ups and downs should the stock falter some. I strongly believe over time my investment will grow in value and this conviction keeps me able to withstand the ups and downs. Only time will tell how SWKS will do, but I believe it’s a good company and it’s balance sheet shows that it is a strong company with very little in the way of liabilities compared to the tremendous amount of assets on hand, including over a billion in cash.
Should you diversify? Typically yes, but this is a personal decision which depends upon your age, income, whether you can sufficiently replace any significant losses with time to recover enough prior to retirement to the point where taking on the extra risk at your current stage would not lead to complete and utter financial ruin for the rest of your life. I think everyone should take on some risk to be able to grow long term wealth, the only question is how much, and that depends upon many factors including risk tolerance, and the ability to replace lost income should things not turn out the way you want.
Skyworks Solutions, Inc.(SWKS) designs, develops, manufactures, and markets proprietary semiconductor products, including intellectual property worldwide. Its product portfolio includes amplifiers, attenuators, circulators/isolators, DC/DC converters, demodulators, detectors, diodes, directional couplers, diversity receive modules, filters, front-end modules, hybrids, LED drivers, low noise amplifiers, mixers, modulators, optocouplers/optoisolators, phase shifters, phase locked loops, power dividers/combiners, receivers, switches, synthesizers, technical ceramics, voltage controlled oscillators/synthesizers, and voltage regulators. The company provides its products for automotive, broadband, cellular infrastructure, connected home, industrial, medical, military, smartphone, tablet, and wearable applications. Skyworks Solutions, Inc. sells its products through direct sales force, electronic component distributors, and independent sales representatives. The company was founded in 1962 and is headquartered in Woburn, Massachusetts.
What does this mean in english? SWKS is a technology company on the cutting edge which designs a variety of popular parts for electronic devices, chips that go in popular smartphones (40% of its revenues come from Apple; as a key supplier of parts for the last several iPhones), and integrated parts for the Internet of Things including parts for smart electronics in automobiles.
Skyworks Solutions, Inc. Fundamental and Technical Analysis
Skyworks is trading at the time of this publication at $105/share in after hours trade. According to investors.com the stock is #10 in its category at this time, and is presently working on a technical chart formation known as a cup with handle with a $117.75 buy point (meaning if it hits $117.75 on volume 40% higher than normal, it could be a good time to buy). Overall, the companies fundamentals look good. SWKS had net income of over $1 billion dollars last year and has over $4.5 billion in assets with very little liabilities in comparison $500 million, and has over $1.6 billion worth of cash on hand. Skyworks has considered merging with another company within the last few years (as a strategic partner. The merger fell through but SWKS still has tremendous cash on hand to buy another company should a good opportunity present itself. The company is very financially healthy and has increased its dividend slightly over the last few years. Skyworks is a growth stock with high potential in a high growth industry.
My Beliefs About the Potential for Skyworks Solutions Inc. and the Growth of the Internet of Things
For those who believe in the Internet of Things and the tremendous potential for growth you may believe like i do that SWKS is a good investment. Skyworks has continually come out with new and innovative products, has increased its content in the latest iPhone and seems to have developed and is working hard to maintain its competitive advantages in supplying Apple. However, some believe that it is a bad thing that 40% of its revenue comes from Apple and until it is able to derive less of its revenue from Apple and more from other companies (to avoid being so heavily dependent upon Apple, which could potentially replace it with another supplier, thus drastically reducing SWKS’s revenue overnight). Skyworks was trading in the $25-$35 range in the last few years, and has gone up significantly, previously hitting around $113 or so before dipping all the way back down to $60 or so in mid 2016. It has now risen again to as high as $115/share recently and is presently trading at $105/share (although to be fair the DOW dropped over 700 points today, based on comments of a possible trade war developing). yesterday the stock was in the $108-$109 range.
My Beliefs About SWKS
As you can see from the above, Skyworks has all the makings of a winner, financially sound, great products, high growth market, strategic partnerships with an excellent company (Apple). You can also see that it has some risks and has made significant up and down moves over the last few years and could certainly do so again. So why invest over $100,000 in SWKS? Because I believe in the company. i believe in its products, and it is a financially sound company with a large cash position, its products are being put in the best products (iPhones for one), and some of the technology which it develops for motor vehicles for instance is not yet mainstream, but i believe it certainly will be within the next 5 years or so, leaving SWKS in a great position to continue to capitalize on the growth in these sectors.
Where could SWKS go from here? it could go up significantly. Analysts were previously estimated $120/share or more. I have my sights set much higher for this one. I believe it will hit much closer to $200/share within a few years. This is due to my belief they will continue to grow earnings and may continue to buy back stock from the open market as well/reducing the number of open shares on the market, which will increase the value of my shares.
Are there better places to invest this $100,000? Should I diversify more broadly? The answer to both is quite possibly yes. However, this is the path I have chosen and will continue to follow for at least the next couple of years (unless something drastic changes with Skyworks, then I may reconsider). if things go well, my investment could double or more. If things go poorly my investment could get cut in half. Only time will tell, but I like the chances with this one.
Skyworks Solutions Inc. is a good overall investment from a fundamental analysis standpoint, and should it hit $117.75 it was also be excellent from a technical analysis standpoint. i will leave the money invested and see how it performs over the next year or two, unless something significant should change. The company appears well positioned to capitalize in what i personally believe is an industry that will continue to grow and develop. I believe that SWKS has a very strategic partnership with Apple and in spite of the risk of Apple cutting back from them, they have continued to gain more content in newer, more popular phones and I believe will continue to do so. Skyworks is well positioned to increase in value in my opinion.
When it comes to retirement planning, one of the most common questions for couples is: How Much Do We Need to Retire?
While this answer will vary for everyone based upon their individual circumstances and how much they need to spend on an annual basis in retirement. The typical retired worker will spend $828,000. Adults 65 and over spend roughly $46,000 annually, according to the Bureau of Labor Statistics, and the average length of retirement in the U.S. is 18 years. Multiply $46,000 by 18, and you’re looking at a $828,000.
Generally, the rule is that you should set aside 15% of your paycheck for retirement savings, and the sooner the better. If you do so at an early age, you can hit the $1million dollar mark or more. For those who are extremely committed to living well in retirement or retiring early, they can even beat that by focusing on pumping as much as possible into tax favored retirement accounts at an early age and investing for passive income. Sadly however, statistics show that many do not take such an active interest or place a priority on retirement savings and the majority fall far short of what would be required to meet the $828,000 retirement of the average retiree.
Don’t be a statistic, start planning for retirement early and don’t underestimate the importance of pumping money into tax favored retirement accounts, getting an employer match (where offered), and placing an emphasis on your retirement investments from a young age. Smart Couples plan together for a successful financial life and a successful retirement.
Feel free to use the retirement calculators on our site to get an idea of what you will need to retire so that you can start planning.
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