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What If AI Challenges Traditional Investment Strategies

Artificial Intelligence (AI) has the world speculating about the future, especially in the realm of investing. AI investment strategy has emerged as a groundbreaking approach, reshaping how portfolios are managed. It has made finance more accessible, analyzing vast amounts of data and offering automated tools where traditional methods once dominated. This includes a whole new generation of investment techniques that leverage the power of AI.

This naturally raises the question: What if AI challenges traditional investment strategies? What will happen to the methods that have guided portfolios for decades?

While this can be an unnerving thought, it's important to understand that no matter how useful AI can be, it has practical limitations. Let's keep the "What If Monster" at bay with a deeper look at AI's impact on investment strategies and how to plan for your financial future.

How AI Investment Strategy is Changing the Investment Landscape

AI is amazing at analyzing large sets of data. It can notice patterns and simplify trends for people who are not financial experts. It has made finance and investment strategies more accessible to the general public and streamlined traditional investment analysis with speed, efficiency, and precision.

AI investment strategy enhances various aspects of investing, including:

• Algorithmic Trading: AI can analyze trends and initiate trades faster than any human trader. This creates the potential for capitalizing on short-term market movements.
• Predictive Analytics: AI can identify trends in massive data inputs. It can help to spot potential opportunities, make trends more visible, and offer useful predictions that were not previously accessible.
• Robo-Advisors: AI robot-advisor platforms offer automated investment advice based on market analysis and financial algorithms. These apps make investing accessible and easy for the average person to understand.
• Risk Management: AI can accurately assess risk based on historical data, helping investors make data-driven decisions.

AI has offered many impressively useful tools, but it hasn't made traditional strategies obsolete.

The Limits of AI Investment Strategy in Financial Planning

Despite its strengths, AI investment strategy has practical limitations. AI tools operate within predefined parameters and lack the ability to interpret complex human behaviors or unexpected global events. Traditional strategies, guided by human insight, offer advantages such as:

• Long-Term Perspective: AI can track short-term trends and potential opportunities very well. However, traditional strategies provide the advantage of insight, patience, and long-term portfolio growth.
• Human Insight: AI can analyze data, but it can't yet interpret human behavior, economic nuance, or geopolitical events - or how they can impact the markets.
• Emotional Considerations: AI cannot yet accommodate the deeply personal aspects of investing. It can't adapt to human emotions like risk tolerance, personal goals for the future, or investing priorities because algorithms can't account for these factors.
• Over-Reliance Risk: It's important not to become complacent and over-rely on AI. Markets are not as predictable as algorithms suggest, and the most advanced algorithms can't foresee every variable or disruption.

AI complements traditional strategies, helping investors understand the market and empowering financial professionals to work more efficiently. But it doesn't replace the wisdom, insight, experience, and adaptability of human investment advisors.

Balancing Innovation with Time-Tested Principles

As AI tools influence investing, the key to success is balancing these new tools with comprehensive traditional strategies. Staying grounded in principles like diversification, asset allocation, and risk management will prepare your portfolio for the long term. Blending innovative tools with established methods will guide you toward a resilient profile that adapts to change and aligns with your investment goals.

Final Thoughts: Embracing the Future of Investing

AI makes us all ask, "What If?" but change isn't as disruptive as many imagine. AI is not challenging traditional investment strategies: it is enhancing them. AI provides a useful toolkit for analyzing and summarizing data. It can identify trends, make investments easier to understand, and streamline short-term investment strategies. However, each algorithm has a specific purpose.

AI is an opportunity to enhance your investment rather than a threat to your foundation. By staying informed, working with trusted advisors, and carefully testing whether each AI tool works for you, you can become a confident investor in an evolving economic landscape.

To learn more about how AI can influence your portfolio or enhance your investment strategy, contact us today. We'll help you navigate the balance between traditional and modern approaches to ensure your financial plan is future-ready.

Any opinions are those of Dale Crossley and Evan Shear and not necessarily those of Raymond James. Expressions of opinion are as of this date and are subject to change without notice. There is no guarantee that these statements, opinions, or forecasts provided in the attached article will prove to be correct. Investing involves risk and you may incur a profit or loss regardless of strategy selected, including asset allocation and diversification. 

Alternative Education Options: Beyond Traditional Paths to Success

College is the start of a new and rewarding life chapter. For many children, getting into their dream school is a top priority. But the waiting period for an acceptance letter can be daunting. Through this informative blog, we will discuss some alternative education options.

Many parents and children worry whether the dream school will become a reality. While waiting for an acceptance decision is not ideal, it's the perfect time to explore the many viable alternative college paths that lead to a successful future. To help you and your child prepare, we're looking at additional educational paths to explore.

Choosing Between Public and Private Universities

We would like to thoroughly suggest choosing between public and private universities. Public and private universities offer an excellent academic path for students. Here is an overview of what each type of university provides:

Public Universities

A public university is a type of university owned by the state or receives a large amount of funding from the government. In a public university, the state defines the curriculum, resulting in a more standardized system.

Benefits

There are several benefits of attending a public university. For starters, these universities generally have lower tuition compared to private ones. Additionally, if your child attends a public university in the same state, they may be eligible for in-state tuition.

Another benefit of attending a public university is that these schools tend to be larger than private universities. This means that students will have access to more classes. A public university also has a broader selection of programs and majors, making finding an area of interest easier.

Private Universities

A private university is an institution not owned, operated, or funded by the government. To ensure the continued operation of a private university, it receives funding from tuition, donations, and endowments.

Benefits

Attending a private university offers many benefits. To begin with, students have access to more specialized programs. A private university may bridge the gap if your child has a unique interest.

Another benefit of a private university is the flexibility surrounding the curriculum. Since the government doesn't regulate private universities, there is more freedom to make decisions about curriculum, admissions, and academic offerings.

Students will also find that private universities have a strong alumni network, which is beneficial in career paths that require networking.

Alternative Education Options

Receiving education isn't a one-size-fits-all situation. There are many alternative education options for students to gain the knowledge they need to succeed. Here are some common paths to consider:

• Online programs: Attending classes online allows students to create their learning schedules and environments, is more affordable, and allows students to learn comfortably.
• Trade school: If traditional schooling isn't the goal, attending trade school allows students to gain specialized skills and hands-on experience in a particular field.
• Gap years: Some students wait a year before attending a college or university. This allows students an opportunity to explore career interests and create space for personal growth.

Funding Education With Financing Options

Knowing how to fund education is essential when planning. Luckily, many financing options are available to ensure your child receives the education they need. Some financing options include:

Federal Financial Aid and FAFSA

By completing the FAFSA application, your child will open the door to many financing opportunities, such as:

• Pell Grants: Need-based grants that don't require repayment.
• Federal Direct Loans: These loans offer lower interest rates and flexible repayment options.
• Work-Study Programs: These programs provide part-time jobs for students, which helps cover education-related expenses.

Institutional Scholarship and Grants

• Merit-Based Scholarships: Awards based on GPA, test scores, and leadership roles.
• Departmental Scholarships: Program-specific scholarships for fields like STEM or the arts.
• Transfer Scholarships: For community college students, many universities offer financial aid to encourage transfer student

Parent PLUS Loans and Private Loans

There are a few options for families needing additional funds. Parent PLUS loans and private student loans may fill financial gaps. However, these loans typically have higher interest rates and should be used after exploring federal aid options.

Choosing the Best Alternative Education Options

We hope you learned a lot about some of the best alternative education options. Not getting into a top-choice school can feel disappointing, but it's not the end. There are many educational opportunities available for your child to succeed. An alternative path offers unique benefits that can align with academic and financial goals. Remember, success isn't tied to a single institution but to the student's dedication, resilience, and openness to new paths.

At CrossleyShear, we make sending your child to college easier through comprehensive wealth management services. A new life chapter doesn't need to be overwhelming. We're here to help you navigate financially. Contact us today to learn more.

Social Security increases benefits by 2.5% for 2025

The 2025 Social Security cost-of-living adjustment (COLA) has been announced.

The Social Security Administration has announced a cost-of-living adjustment (COLA) to recipients’ monthly Social Security and Supplemental Security Income benefits. Nearly 68 million Americans will see the 2.5% increase in their payments beginning in January 2025.

The 2.5% increase aims to help beneficiaries keep up with inflation. Although lower than the 3.2% COLA for 2024 and significantly less than the 8.7% increase in 2023 and 5.9% in 2022, it still provides a welcome boost to recipients’ monthly payments. The COLA is calculated based on the Consumer Price Index for Urban Wage Earners and Clerical Workers (CPI-W), which measures the average change in prices over time that consumers pay for a basket of goods and services. The COLA is designed to ensure that the purchasing power of Social Security and SSI benefits is not eroded by inflation.

According to the Social Security Administration, on average, retired workers currently collect $1,927 per month in Social Security payments, or roughly $23,124 per year. The 2.5% COLA will add about $49 per month to those payments or $588 for the year.

Keep in mind all federal benefits must be direct deposited. So if you haven’t already started receiving benefits, you need to establish electronic transfers to your bank or financial institution. Connect with your advisor to better understand how this COLA adjustment may impact your overall financial plan.

Source: Social Security Administration

The consumer price index for urban wage earners and clerical workers is a monthly measure of the average change over time in the prices paid by urban wage earners and clerical workers for a market basket of consumer goods and services.

Links are being provided for information purposes only. Raymond James is not affiliated with and does not endorse, authorize or sponsor any of the listed websites or their respective sponsors. Raymond James is not responsible for the content of any website or the collection or use of information regarding any website’s users and/or members. Raymond James does not provide tax or legal services. Please discuss these matters with the appropriate professional.

Make your final tax-saving moves before Dec. 31

Proactive investors know that the months before year-end can be an ideal time to make strategic adjustments.

While keeping in mind your long-term investment goals, meet with your advisor and coordinate with your tax professional to examine nuances and changes that could impact your typical year-end planning.

Mind your RMDs
Be thoughtful about required minimum distributions (RMDs) to ensure that you comply with the rules – especially as some of those rules have shifted throughout the pandemic.

Investors who reach a certain age are required to take RMDs from their IRAs. You’ll face a hefty 25% tax penalty on amounts not withdrawn from your IRA to meet the RMD, so be sure to speak with your advisor to ensure you’ve met your obligations.

Note: If the RMD is timely corrected within two years, the excise tax rate could drop to 10%. A few reminders for future distribution planning:

• RMDs can be automated with your advisor to help ensure you don’t miss applicable deadlines.
• Your first RMD can be delayed until April 1 of the year after you reach 70 1/2, 72 or 73 (depending on your year of birth). If you delay, however, you must also take your second RMD in the same tax year. This can inflate your income, which may affect your tax bracket. Check with your advisor to determine what is applicable and best for you.
• Subsequent RMDs must be taken no later than December 31 of each calendar year.
• Qualified charitable distributions allow traditional IRA owners who are 70 1/2 and older to gift up to $105,000 from their IRA to a qualified charity.This is a non-taxable distribution from their IRA and can be used to satisfy an RMD.
• Be mindful of how taking a distribution will impact your taxable income or tax bracket. If you are in a low tax bracket, discuss with your financial advisor and tax professional about taking an additional strategic distribution at that lower rate.

To harvest or not to harvest
Evaluate whether you could benefit from tax-loss harvesting – selling a losing investment to offset gains. If your capital losses exceed your capital gains, your excess losses up to $3,000 (single or married filing jointly) can be used to offset ordinary income. Any additional losses can be carried forward to future years. With your advisor, examine the following subtleties when aiming to decrease your tax bill:

• Short-term gains are taxed at a higher marginal rate; aim to reduce those first.
• Don’t disrupt your long-term investment strategy when harvesting losses.
• Be aware of “wash sale” rules that affect new purchases before and after the sale of a security. If you sell a security at a loss but purchase another “substantially identical” security – within 30 days before or after the sale date – the IRS likely will consider that a wash sale and disallow the loss deduction. The IRS will look at all your accounts – 401(k), IRA, taxable, etc. – when determining if a wash sale occurred.

Manage your income and deductions
Those at or near the next tax bracket should pay close attention to anything that might bump them up and plan to reduce taxable income before the end of the year.

• Determine if it makes sense to accelerate deductions or defer income, potentially allowing you to minimize your current tax liability. Some companies may give you an opportunity to defer bonuses and so forth into a future year as well.
• Certain retirement plans also can help you defer taxes. Contributing to a traditional 401(k) allows you to pay income tax only when you withdraw money from the plan in the future, at which point your income and tax rate may be lower or you may have more deductions available to offset the income.*
• Evaluate your income sources – earned income, corporate bonds, municipal bonds, qualified dividends, etc. – to help reduce the overall tax impact.

Evaluate life changes
From welcoming a new family member to moving to a new state, any number of life changes may have impacted your circumstances over the past year. Bring your financial advisor up to speed on major life changes and ask how they could affect your year-end planning.

• Moving can significantly impact tax and estate planning, especially if you’ve relocated from a high income tax state to a low income tax state, from a state with a state income tax to one without (or vice versa), or if you’ve moved to a state with increased asset protection. Note that moving expenses themselves are no longer deductible for most taxpayers.
• Give thought to your family members’ life changes as well as your own – job changes, births, deaths, weddings and divorces, for example, can all necessitate changes – and consider updating your estate documents accordingly.

Next steps
Consider these to-do’s as you prepare to make the most of year-end financial moves, and discuss with your financial advisor and tax professional:

• Manage your income and deductions, paying close atten­tion to your marginal tax bracket.
• Evaluate your investments, keeping in mind whether you could benefit from tax-loss harvesting.
• Make a list of the life changes you and your family have experienced during the year.

*Withdrawals from qualified accounts, such as an IRA, prior to age 59 1/2 may also be subject to a 10% federal penalty tax. RMDs are generally subject to federal income tax and may be subject to state taxes. Consult your tax advisor to assess your situation. Raymond James does not provide tax or legal services. Please discuss these matters with the appropriate professional.

Links are being provided for information purposes only. Raymond James is not affiliated with and does not endorse, authorize or sponsor any of the listed websites or their respective sponsors. Raymond James is not responsible for the content of any website or the collection or use of information regarding any website’s users and/or members. Raymond James does not provide tax or legal services. Please discuss these matters with the appropriate professional.