#10 - Finance Fridays - The 3 Tiers of AI Investing, Premium Bonds and Leaving the UK

Contents:

• 💡 Idea of the Week - You’re probably too poor to leave the UK

• 💹Investment Idea review - Premium Bonds

• 🥗Side Hustle of the Week - Notion Templates

• 🎒Useful Resource - Is the S&P 500 Too Reliant on the Magnificent 7?

• 🎒Useful Resource - The 3 Tiers of Investing in Artificial Intelligence

💡 You’re probably too poor to leave the UK

Inspired by I'm leaving the UK...

For years I’ve seen a lot of people talk about leaving the UK. I’m now starting to see a lot of content creators talk about relocating. And no wonder, given how bad the future prospects of the UK are in terms of living standards. 

But someone recently made a good point. Do you want to leave the UK simply because you’re poor? Things would be cheaper in Thailand but so would your wage. You can earn in America but the price of goods are more expensive (especially healthcare).

One big reason for wanting to leave is the housing crisis. It is very difficult to feel settled when you don’t even own the house you’re living in. But there’s a housing crisis everywhere. And moving to a country with more housing inventory would just be you contributing to the problem. 

One example is Portugal going from offering digital nomad visas to local residents struggling to keep up with rent prices caused by the influx of expats. And this phenomenon is happening everywhere, there are multiple mini documentaries on how Americans are moving to Mexico for a “better life”.

But governments haven’t learned their lesson with Japan offering digital nomad visas to increase their declining population growth numbers. But there’s a catch, you have to be rich.

'Digital nomad' visas are easier to get than ever — especially if you're rich

Key takeaway:

Only rich people can live comfortably in the UK.

And you can only leave the UK if you’re rich.

🎒Is the S&P 500 Too Reliant on the Magnificent 7?

Inspired by Is the S&P 500 Too Concentrated?

There’s been mumblings that with the S&P 500’s recent performance against a backdrop of poor economic outlook, mass tech layoffs and high interest rates that it is due for a correction. An analysis by Ned Davis Research showed that the S&P 500 is more than 5% "overvalued. One of the main issues with the index is that most of the gains are from the Magnificent 7 (Apple, Microsoft, Google parent Alphabet, Amazon, Nvidia, Meta Platforms and Tesla).

This video explains why this is not the first time in history this has happened and that the concentration of the top 10 stocks has been far higher before.

🎒The 3 Tiers of Investing in Artificial Intelligence

Inspired by Investing In AI

This is my favourite video on investing in AI. The author goes through the practical applications of using AI day-to-day moving on to how to invest in AI without getting caught in the hype. The main takeaways from me are that there are many ways to invest in Artificial Intelligence without being overly reliant on NVIDIA or hype cycles. 

You can choose to invest in Semiconductor companies/funds based on the 3 Tiers of AI Investing (Enabler, Enhancer, Engager). I’ve mentioned before that semiconductors are the building blocks of AI applications so if the AI market is going up, some of that value should naturally trickle down to semiconductor companies.

1. Enablers: Develop and implement the underlying technology. (NVIDIA)

2. Engagers: Design, create, integrate, and deliver services to customers. (OpenAI)

3. Enhancers: Devise their own value-added services, on top of the services provided by Engagers. (Microsoft)

From an investment perspective, I think I will try to reduce my risk by focusing my investments on Enablers (who have utility that can be used for AI or other technologies). If you think about NVIDIA's journey from serving the video game market to AI, their ability to remain Enablers of technology protects the company from disruption in the long term. 

Even though Nvidia has said cryptocurrencies do not “bring anything useful for society”, it still benefited massively from the crypto explosion in the early 2020’s. NVIDIA still dominates the video gaming market with graphics processing units (GPUs), bringing in $9 billion in revenue in 2023. So now it has multiple streams of income to carry the company forward in whichever direction the market goes.

Whereas OpenAI (Engager) may be at the forefront of AI applications today but it is more likely to be disrupted by competitors. Then we have Enhancers like Microsoft or any traditional company that can benefit from AI. This is also an ideal position to be in. They can hedge their bets by getting involved with the AI bandwagon without betting their company’s future on it.

I also found this chart interesting. Will NVIDIA suffer a similar fate to Cisco?

💹Investment Idea review (Premium Bonds)

1. Potential upside ⭐️ - Extremely Low chances of winning (1 in 2,465,169,000)

2. Level of risk ⭐️⭐️⭐️ - Technically you can’t lose money

3. Upfront costs ⭐️⭐️⭐️- There’s a minimum payment to enter but there’s no fees and it’s tax free

4. Historic performance ⭐️ - Nobody actually wins, and if they do they are most likely never claimed (seriously). 

5. Skill required ⭐️⭐️⭐️ - Can’t get anymore beginner friendly than this

6. Market saturation⭐️ - Somehow it has maintained a good reputation and a lot of people are invested in it which reduces your chances of winning significantly.

MoneySavingExpert’s article on Premium Bonds does a great job of breaking down the pros and cons of Premium Bonds. 

“Look at Premium Bonds with a clinical financial eye and they're only a good bet as a serious place to put savings if you're lucky, or if you're a higher- or top-rate taxpayer who has used up their personal savings allowance, cash ISA allocation, and put the maximum in today's top 5.16% savings account.”

🥗Side Hustle of the Week (Notion Templates)

1. Hours per week ⭐️⭐️⭐️ - Building a good template will take some time especially if you want it to sell well. But once it's built, you can sell it indefinitely.

2. Skill required ⭐️⭐️ - Your specialist knowledge you already possess is the easy part since Notion is becoming more feature packed and complex as time goes on. But it's an easy no-code platform to learn.

3. Up front cost ⭐️⭐️⭐️ - It's free. Any advanced features are absolutely not necessary to sell templates of your own.

4. Market saturation ⭐️⭐️ - There's a lot of competition now so you need to lean heavily on your niche and any specialist knowledge you have. Creating another budget tracker or project planner and expecting it to sell is naïve at best. Be super specific by country, role, industry, expertise level and find a way to reach your target audience.

5. Timeline to reach success ⭐️⭐️ - It depends on your marketing strategy. If you have no platform, no presence it'll take 6 months to build up a reputation and brand.

6. Income potential ⭐️⭐️⭐️ - Thomas Frank is an example of how he's gone all in and earned more than anyone ever expected. 

✍🏿Quote of the Week 

“You don't need to be the smartest to get wealthy, you just need to be extremely self-disciplined in the execution of your long-term plan.”

― Orange Book