AI and Finance

We're diving into one of the biggest topics in finance right now: AI. From your investments to your personal finances, here's what you need to know.

Ask Acacia

Q: "Is AI causing a stock market bubble, and should I be worried about my investments?"

A: Not necessarily — let's look at what is different when compared with other bubbles.

While current valuations are elevated and expectations are high, today's AI businesses are profitable, cash-generative, and financially strong; a meaningful difference from the dot-com crash, when many companies had little more than a domain name and a pitch deck.

The real risk isn't a sudden collapse; it's whether future growth lives up to current expectations. For most investors, the focus shouldn't be on trying to predict market shifts, but on staying diversified and committed to a long-term plan.

Picture This

AI is now attracting 53% of all global venture capital — more than half of every dollar invested worldwide.

Market Focus: AI, Hype or Reality?

Markets are rallying on AI, with a handful of mega-cap companies driving a large share of returns. This level of concentration is high and can add fragility.

AI is also generating real revenue, though questions remain over whether returns will justify the scale of investment.

The key risk is expectations. If growth delivers, valuations can hold. If not, we're more likely to see adjustment than a widespread collapse. Enthusiasm is elevated, but still concentrated, not broad-based.

What AI Means for You and Your Investments

• Personal Finances. AI-powered budgeting apps can automatically categorise spending and flag patterns. AI is also excellent at explaining financial concepts such as ISAs, pensions, and tax wrappers in a simplistic way. Watch out: AI is great for aiding your understanding, not for decisions. AI models 'hallucinate' by making assumptions when they don't have all the information and so can get things wrong. This can often result in costly mistakes if not properly verified by a professional.
• Your Investments. AI can digest long company reports and earnings calls in seconds, surfacing the key points. It's a useful research companion, especially for staying across news between adviser meetings. Watch out: AI research can be outdated or miss nuances. Use it to get up to speed, not to replace proper due diligence.

What to Do... "Control the Controllable"

From a risk management perspective, the most productive questions are rarely about whether a correction will happen, but about the factors within your control.

• How comfortable are you with short-term volatility? Understanding your own risk tolerance is crucial to building a portfolio you can stick with through market uncertainty.
• When are you likely to need access to the capital? Your investment time horizon should drive your allocation decisions, not market headlines.
• If markets were to fall materially, how would that affect your standard of living in the interim? Knowing the real-world impact of a downturn helps you plan for resilience, not just returns.

These are the considerations that should shape how a portfolio is constructed. A well-calibrated portfolio is one that you can remain invested in through periods of uncertainty — and not one optimised for a market environment that may or may not materialise.

"Control the controllable, and let a diversified, low-cost portfolio do the rest."