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Artificial intelligence is a really hot topic at the moment. My wife and I are both in full-time, well-paid jobs with three young children. I want to invest more of our disposable income in the stock market. Should I reallocate more of my investment portfolio to AI stocks and shares with a long-term investment view? Which specific AI areas should I look at?
Dan Boardman-Weston, chief executive at BRI Wealth Management, says artificial intelligence (AI) has already had a substantial impact and this is only going to accelerate over the coming years.
Some of the strongest performers in the stock market this year have been companies that are directly involved in AI, such as Nvidia. The theme of AI has already attracted a significant amount of investor interest and it’s understandable that private investors are keen to capitalise.
There are a few housekeeping matters that need to be considered before we get to the specifics of investing in AI. First, you need to consider where best to make any investments. As you are in well-paid jobs you should ensure you both make healthy contributions into your pensions, primarily to plan for your future and to benefit from the generous tax relief available on contributions.
Workplace pensions often have limited investment choices, so if you feel strongly about investing in AI you may need to consider setting up self-invested personal pensions (Sipps).
After pensions have been considered, it is important that you contribute towards your combined £40,000 annual Isa allowance. Investments made in an Isa wrapper are free of income or capital gains tax and thus make them valuable savings vehicles.
AI is an attractive theme and many companies are going to be beneficiaries of its development. It won’t just be companies directly involved in AI that make for successful investments, but companies that can leverage AI to improve their efficiency and profit margins.
With this in mind, having broad exposure to the stock market is still likely to give sufficient exposure to AI. To increase exposure even further then we would suggest allocating 10 per cent of a portfolio to specific AI funds and a further 10 per cent to a broader technology fund.
AI funds to consider include Polar Capital Artificial Intelligence, Sanlam Global Artificial Intelligence and L&G Artificial Intelligence ETF. Polar Capital and Sanlam are run by experienced fund managers with good track records and L&G is a cheaper passive vehicle that provides broad exposure to the AI theme. Technology funds should also be considered and we would recommend Scottish Mortgage Trust and Polar Capital Technology Trust. Both are run by experienced managers and are a good way to get technology exposure within a portfolio.
Investing in AI has been a rewarding but volatile venture this year and this needs to be taken into account by investors. However, given that you have a long-term time horizon and are in well-paid jobs, then short-term fluctuations shouldn’t be too much of a concern.
How can I protect myself against art fraud?
I have a significant art portfolio, but am looking to sell some works to buy others. However, I have seen recently that art fraud is on the increase. What should I consider to protect myself and my money against this?
Daniel Gore, senior associate at Withers, a law firm, says fraud of all types is on the rise and everyone needs to be aware of the tools and scams that fraudsters are using and have heightened scrutiny when dealing with high-value items.
When it comes to art, if you have a significant portfolio and no curator, it might be worth asking a professional to inspect your collection as a first step. Your collection might have intrinsic value and removing certain parts of the portfolio might impact the overall value disproportionately. Understanding what you own and what you might want to add could help you create a specific plan for your activity in the market which could combat action by fraudsters.
You should also consider using professional storage facilities, which can provide you with a safe, carefully managed environment to store your portfolio, retaining its value and also acting as a location for any physical transaction. That facility will have its own security arrangements and insurance policies and you will contractually have rights to protect your position.
Make sure your portfolio is adequately insured. This will require a professional appraisal of the works being insured, which could be a helpful guide for you moving forward.
If you are buying art, always undertake due diligence on both the seller and the artwork itself. Respectable galleries with strong track records are good places to start — not least because they have in-house authentication teams and thorough insurance protection. You might deal with individual sellers or artists themselves, so any background information you are able to obtain independently is useful. Do not just rely on materials provided by that seller but make your own enquires from other available sources in the market.
Our next question
I am in the process of separating from my husband. He moved out of our family home in February, we have made a divorce application and we are now exploring how best to divide our assets. The most convenient arrangement for me and our children would be for him to transfer his share in our family home in London over to me, while I transfer my stake in our holiday home in France over to him. I understand that recent changes to the tax rules for divorcing couples means these transfers will not be liable for capital gains tax. Is this correct and what will happen when we come to sell either property?
You can also tailor commercial sales or acquisition agreement so it works for you from a cashflow and security point of view. This might include staggered payments or the use of escrow accounts to hold funds while checks or investigations are ongoing. There are specialist escrow agents to hold funds until certain conditions are met, and professional advisers are also able to set up escrow accounts. The agreement can include a mechanism and process to complete the transfer, details on insurance and when ownership and liability passes from one party to the other.
Make sure you look at provenance and authenticity of the art itself when buying. You should obtain a chain of title records and ideally condition reports and any records of restoration works. Finally, cross check whatever you are buying with the Art Loss Register, which is the largest private database of stolen pieces of art. If the seller is not prepared to give you this information, then that is an immediate red flag.
The opinions in this column are intended for general information purposes only and should not be used as a substitute for professional advice. The Financial Times Ltd and the authors are not responsible for any direct or indirect result arising from any reliance placed on replies, including any loss, and exclude liability to the full extent.
Do you have a financial dilemma that you’d like FT Money’s team of professional experts to look into? Email your problem in confidence to yourquestions@ft.com.