Will the AI bubble burst? We break down if tech is still worth investing in

Added: 2026-06-02

[00:00:00]I think the innovation and adoption of tech is only going to get bigger and bigger and bigger.

[00:00:06]>> Tech in many ways has become a necessity for all of us, right? Uh if you see how we used to do banking, how we used to do do transportation, order our meals, everything is dependent on tech today, right? Will the same set of companies the Mac 7 exist 10, 15, 20 years uh down the line? I don't know. Some will, some may get disrupted. We have seen this you know like when I started university the first mobile phone I had was in Ericson okay I don't know if your viewers have used Erikson but Eriken and Nokia were the two largest players and they were going to revolutionize the world then came smartphones and today it is dominated by Samsung and Apple >> same thing AI is one of those generational shifts that we're going to see there will be new businesses that come up you know open AAI anthropic and so having exposure to tech tech makes sense but I can't tell you for certain cy whether the same set of companies will be there um uh 10 years uh down the line.

[00:01:06]So many people have told me that they are investing in tech stocks, write the AI wave, others have said, but with the magnificent 7 growing more expensive and with top of the AI bubble bursting, is tech still such a good long-term investment? Hi, I'm Suen Tan and you're listening to Head Start on Record, a show that gives you a head start in your personal finance, career, and life. In the studio with me today are our investment gurus, Subra Strategy from DBS Bank and Mark Yo from Stashaway. So, hi guys. It's so good to have you here today.

[00:01:37]>> Thank you for having us.

[00:01:38]>> Yeah, maybe we just start with, you know, what are the tech stocks that you guys invest in or do you even invest in tech stocks, right? Maybe Mark, we start with you.

[00:01:45]>> Yeah. So, um, for myself, I uh gained my exposure in AI through a mutual fund.

[00:01:51]So, I do rely on um a fund manager that is able to kind of select stocks that really relate to the AI theme, but aside from just having a very intentional exposure to AI fund, um I have my core um investment holdings, so S&P, which is uh fairly popular, um that would have quite a big concentration in some of the tech and AI stocks as well. So, it perhaps is a conviction on my end to add into that uh theme through a dedicated AI fund.

[00:02:19]>> Okay. So you don't like do individual stocks?

[00:02:22]>> Yeah, because I think I recognize the theme of AI, but it's very tough for me to really uh select the stocks. Um, of course there are popular names, but um I'm just being very honest with myself.

[00:02:36]One, do I have that expertise to really uh decide that this AI stock um um is worth the price? and is there do I have the resources also to kind of spend the time uh and the research capability to have a more informed decision. So then I kind of take the decision to uh use um a fund manager that does the work for me.

[00:02:55]>> Ah okay that makes a lot of sense. Yeah.

[00:02:57]So subra you know people told me you are DBS Mr. Tech. So do you invest in tech stocks?

[00:03:02]>> Yeah I think the reality is there's no getting away from tech these days. Tech is such an integral part of the global growth story. It is also a very exciting part of the equity market story. So I do have exposure to tech as part of my overall portfolio. Um the way I approach it is I have a bit of US tech and a bit of Asian tech. Um with US tech and Asian tech, I try to capture the um the AI value chain if you will. So I have a few of the mag 7 names. You have Apple here.

[00:03:32]>> I have some of the semiconductor and ship companies. Um and then I try to see what are the other areas that could potentially benefit uh from the investments uh that is going into AI infrastructure. So I try to have a bit of industrial power utilities to sort of add on uh to the AI story. I do a mixture of um single stocks uh because that is my day job.

[00:03:54]>> Um I also uh have ETFs um and I don't do funds. I primarily do it through ETFs and single stocks.

[00:04:01]>> Okay. So since you do individual single stocks, right? like what is your strategy when it comes to stock picking?

[00:04:07]>> So stock picking um generally I I would have to have high conviction as Mark said you know you really need to put in the time. I'm in an advantageous position because my day job includes researching companies. So I am aware of the names that I would have. So you know things like Microsoft, Google, Amazon I mean these are safe good quality companies that I have. Um areas where I don't have uh a specific view I try to do it through an ETF. So in Asia um I have in the past have individual stocks but at present I think it's an easier way just to do an ETF because there are so many different companies out here.

[00:04:41]>> Right. Okay. So would you say like for young investors especially if you want to do individual stock picking you need to really know the fundamentals of each stock and you need to follow like their story. Right.

[00:04:49]>> Absolutely. I think you know when it comes to investment you really need to be comfortable a with what your goals are b what you're investing in uh and c whether you have done the work whether you understand what those companies are um if you don't have that uh if you don't have the time as Mark said I would go with S&P 500 it is the easiest way uh to build up your uh portfolio and start your investment journey >> okay so my question is do you check your individual tech stocks every day like do you look at their performance >> so the ones which are volatile I would it's human nature >> but generally my co-h holdings I don't check every day um I try to uh ascribe a certain amount >> um so I try to do it in a systematic manner so maybe every month or every quarter I'll put a certain amount irrespective of the stock price into my co-holding it's much easier to do it um with S&P 500 >> irrespective of the index levels with uh stocks um that is my day job so I do track them on a daily basis so I know what's happening and if the investment case changes for whatever reason, I may decide to rebalance uh my portfolio.

[00:05:54]>> Okay. So, it does sound like we are all still investing in tech, right? And we know that there has been talk of an AI bubble for some time. So, maybe you can explain, you know, what is this AI bubble about?

[00:06:03]>> Yeah. So, um typically the way I would describe a bubble is when asset prices get elevated and they are not supported by fundamentals like earnings and cash flows and so there's a risk that you may see a crash. Um I think often times the way people use uh the term bubble is just because share prices have gone up and they've gone up for 3, four, 5 years like we are seeing currently.

[00:06:25]>> I don't necessarily agree that just because share prices have gone up it translates into a bubble. You have to see what has driven those share prices.

[00:06:33]If it is earningsled >> uh and I can give some examples if you see the earnings that the tech companies in the US has been delivering you know they've been consistently delivering for the last six seven years 20 30% earnings growth so if the share prices are giving you 20 30% annual return to me that's not a bubble um but uh I think the the the impression people have is just because the share price has gone up it's a bubble >> ah okay okay because I mean Mark you know people have said that it's not even if the bubble will burst right it's kind of like when it's going going to burst like what's your take on that then?

[00:07:04]>> Yeah, I think I'll echo what Subra says because as long as the fundamental continue, there is no finite time for a bubble to burst as long as it is quality le there's actual earnings. Um so probably it's also a good time to uh compare this to maybe past bubbles, right? And and bubbles is always easy to see on hindsight um not in real time. So if we kind of it's quite often compared to you know the 19 uh the dotcom bubbles, right? 1990s. Um the difference then is uh companies at that time uh had valuations of 80 90 100 times and that's really more of the denominator effect right the it's not backed by earnings so if you kind of think of PE ratio common valuation multiple if you don't have that uh earnings growth um you will have very high multiple now 80 90 100 times PE itself does not mean it's a bubble but uh of course the assumptions to justify that is insanely high, right? To to kind of justify the price, you need a really unsustainable earnings growth.

[00:08:07]And back then in the com bubble, you have businesses that simply put their domain with com and and they pretty much got that kind of valuations.

[00:08:14]>> Uh so, but what is different today is that actually if you think about the more popular AI names like the semiconductors or even the kind of uh software that delivers the cloud to power AI um names that um probably our audience are familiar with the Google, the Microsofts, they are very good quality businesses. They didn't just come into AI um um to ride the wave.

[00:08:35]They've Microsoft, Google, Alphabet, all these kind of stocks. They've been there for some time. They have an actual business value and they they kind of pivot um uh or at least focus on a larger AI demand. Uh Nvidia, of course, the most uh talked about name uh is the most uh powerful uh chip needed to run a lot of computation. So there is a lot of value and they are by no means cheap cheap cheap for those value investors that are just seeking cheap stocks but they are able to back that. So you'll be surprised to hear that even today the last uh forward PE of the MAX 7 is actually quite modest at uh 25 even at the high of 2020 22 it's it's it's um 30 but it's nowhere near the kind of uh com bubble where there's very little value. Just to add on uh to Mark's point, he's absolutely right. You know, if you see the fundamentals of the companies today, and most of your view viewers would be familiar with the Mag 7, >> but they may not be familiar with the four horsemen.

[00:09:33]>> So, back in back, late 1990s, early 2000 during the >> uh we had the equivalent of the Mag 7 called the four horsemen. And the idea was that these companies Microsoft, uh Cisco, Intel, and Qualcomm will revolutionize the world of uh internet.

[00:09:49]M >> um and there was a lot of hope built onto it. At its peak they were trading on a price to earnings multiple of 150 160 times.

[00:09:59]>> Right now we are nowhere near uh you know most of the Mac 7 companies except Tesla is trading at 25 26 times uh price to earnings right and these guys are growing still at 20 to 30%. So if you ask me I don't think there is a bubble across the board. There may be individual companies which has become bubbish but not at the aggregate aggregate market level >> right okay yeah that's a really interesting answer right because I mean I think because of you know all the AI talk people say that there are companies that are overvalued or overleveraged like can you explain what that means as well and whether that affects maybe like you were saying just a small minority of companies or is it like a bigger proportion right such that it becomes a cause for concern >> yeah so certainly there are pockets where there there may be frothiness in terms terms of valuation. I think often times people just find it difficult to buy these companies because they have seen doubling of the share prices, right?

[00:10:54]>> And so people think, oh, they're expensive relative to what I saw.

[00:10:58]>> But it's also important to understand that these companies earnings have also doubled over that period.

[00:11:03]>> So if you look back, so the way to look at stocks is not just price but price relative to the earnings that these guys are are generating. Um, so yes, so there's a natural fear. I understand that it's human um but uh yeah certainly we don't think that um at the broad level things are looking expensive also in the newspaper you have heard you know companies like Google Meta um they are borrowing huge amounts of money so in absolute terms the quantum is large 200300 billion but if I just take a step back uh and you look at the four largest companies in the US their market capitalization or the value that they have is in excess of $15 trillion dollars They generate every year $1.5 to2 trillion of revenue. They generate profit on a as a group uh a couple of hundred billion. So if you take on borrowing of 300 400 billion it sounds large but relative to the size of these companies it's actually not that big.

[00:12:00]>> Yeah. Okay. I think that's a really good point right about not just looking at the share price but the earnings as well and the company's performance at this point in time. And I mean you know speaking about that we definitely going to talk about the Mac 7, right? maybe you can explain like what is the Mac 7 and how are these companies then doing?

[00:12:16]>> Yeah, the MAC 7 is uh a popular term uh on the kind of the seven uh biggest uh companies that have uh one a strong AI tilt but of course they they are seen as magnificent in a sense that regardless of market regime because of their structural story they they are seen to be the darlings the kind of very attractive stocks in whichever market and hence the term magnificent 7. today your Mac 7 the constituents may change slightly but commonly it's your your your Teslas your Microsoft your Amazon um >> yes so so these are the uh magnificent seven stocks uh and of course there's a lot of uh excitement because their last uh three four years despite the kind of draw down in 2022 they've rebounded and it kind of reinforces the concept of magnificent in the first place and hence the term magnificent 7 Right. And I guess for a first- time, you know, investor, I say, "Oh, I want to go into tech." Right? And it looks like everybody's talking about this Mac 7, so why not try that? But we know that it's not like the share price is not the most affordable at the moment. If you're a young investor, like I think I checked yesterday, May 7, Apple was trading around like 289 USD, right? Not even SGD. So Mark, if I'm a young investor, what's your take on buying the Mac 7 as like my first investment ever? Yeah, I think the concept of affordability is maybe not the right framing because you can always choose how many number of stocks and it's always relative to the size of your portfolio. So, um it's it's quite it's quite difficult to say I can't afford one stock of Microsoft which is 289.

[00:13:52]So, I think what what they're really saying is I'm afraid the price is too high and is it really worth have I missed out the rally? U which of course I think both Subra and myself have started off that you know just because a price have done well does not mean that we miss the boat. As long as the fundamentals and the earnings remain sound, um investors should uh appropriately sized and gain exposure to such stocks rather than trying to buy um at the lowest price possible because there is the other risk that um >> missing out, right? If if if investors actually try to time and try to wait for a big draw down, >> one that might not happen and you have to consider the opportunity cost of that. Uh and number two, the longer you wait, at some point you end up feeling the kind of urge to buy even at a higher price, which defeats your initial purpose, right? When you want to. So ultimately the way to solve this conundrum of should I wait till a draw down happens and give myself a bit more security or should I buy it at the price today even if it's slightly expensive >> to the way I see it is more of number one um start with your own investment objective because even if there is a strong structural uh reason to buy into AI it's not really advisable to put 100% just because the price is is attractive um there's always a need to put at least some allocation. Now whether that's 10 20 that's down to the adviser and that's down to your own financial circumstance.

[00:15:22]>> But you don't want to have such a binary call on gaining exposure either zero or allin or even borrow to buy stocks in the case of some US retail traders.

[00:15:31]Exactly.

[00:15:31]>> You you don't want to do that. You want to have at least some participation in it and in a well- constructed portfolio.

[00:15:37]>> Okay. Right. actually um if affordability in terms of price point is the concern. I totally agree that that's not how you should look at investment.

[00:15:45]But if it is affordability actually there are platforms um including at DBS where you can buy fractionalized shares where you don't have to buy a full share of Apple you can buy a fraction of the share uh and it it will happen more and more platforms will be offering that uh over time. Yeah. Personally, I also think, you know, going back to S&P 500, if you just buy the index or through an ETF, that already gives you a 40% exposure to technology because S&P 500 has 40% allocated towards tech, >> right? Exactly. Yeah. So, it's not just a case of saying, oh, you know, like Apple's 289 or Microsoft is 420 right now, you know, and I kind of have missed it, right? because I want to buy low and sell high obviously as everybody wants to but um it's a case of like really looking at what you need and also where your portfolio allocation is going right >> just just to add to that point I think the beauty of this question it's you don't need to be exactly right that means you don't have to make such a binary bet and and often you know as adviser uh I've always got the question you know the question is always framed should I go in now should I as if it's a kind of all or nothing kind of question when um the the the the obvious uh or a more structural answer is you don't need to make that call. So the worst the worst case let's bring this to life a bit more. Let's say truly is a bubble which of course that's another separate discussion whether it is a bubble is a separate discussion topic but let's even assume that the valuations today are a lot more expensive but AI is here to stay >> right to put a 10% allocation kind of gives you a nice weighted probability between okay even if the next two years there's going to be a kind of correction of 20%. Because you size it at 10 the absolute exposure to your overall portfolio is 2%. It's something that clients are willing to um at least they won't feel like their life is destroyed because I put all my portfolio in AI but at the same time you're not missing out just because you're always waiting for the draw down which is a bit of like waiting for god that never comes right that's a great example so it's uh so to solve this problem it's always nice to add um an allocation but the assumption to doing something like that uh comes with the premise that in the very long run there is still value so it's a nonzero allocation Now the question then whether it's 5 10 50 is down to the risk profile the life constraints but you don't need to make a binary question of uh should I buy now it's always a kind of exposure to a structural long team and one way to diversify it is uh dollar cost averaging as well right you don't have to lock in um your exposure all at one price today you can always build a more regular um investing plan so you're kind of also diversifying your entry points so you uh you're also less worried about even if I'm buying AI stocks at today's expensive price, even if it draws down because I believe in the long-term theme of AI, I'm actually lowering my average cost and still maintaining the allocation as well.

[00:18:40]>> Yeah. I mean, speaking of portfolio allocation, right, and diversifying your portfolio, you know, we can also talk about some other companies that are still within I guess the general tech industry and sector, but they are not pure AI plays or not like the Mac 7, right? So, Subra for example, if I want some exposure to US tech, you know, what are some of the industries that I can look at?

[00:18:59]>> Yeah. So, that that's a great point. I think often times people think of technology just as the tech companies, but actually today's tech if you see uh the way I see it, there are with AI there are three layers. The first layer is of course the infrastructure layer and everyone talks about it the data centers, semiconductors which is used to build the computing uh power.

[00:19:20]>> But then you have to actually build the data centers. is you got to power the data center. So there is an energy stack that has to come into uh the equation as well. Uh because let's be honest AI is quite energy um intensive, right? So I would look at both the energy stack um what goes into the construction of these data centers. Then um so semiconductors and uh the big technology companies will be a part of it. Utilities, the guys that provide electricity are also a part of it. There are things like modular nuclear reactors that everyone is talking about because a lot of these large data centers they're trying to create their own nuclear power plant to provide power to run the data centers right so these are all areas which I think offer attractive opportunities but often times people only focus on the tech not the ancillary industries and look um our view is that the build phase of AI you know building the computing power is going to last for at least another couple of years right after that build phase is done Then comes the monetization. How do you drive monetiz?

[00:20:21]You have spent so much money, right? You need to drive revenues. Uh and the monetization will involve application which which will involve some layer of software companies. There will also be new businesses that come up. So everyone has heard of OpenAI, Anthropic. Wouldn't surprise me if in the next 2 years you see them also being listed and there will be new business models that emerge.

[00:20:42]So that's why you know sitting today I may not know how the world will look 5 years out but I know if I have exposure to tech more broadly that will capture some of the new business opportunities that come in as well. Yeah, it's so interesting that you even talk about utilities and energy companies, right?

[00:21:00]Because that's something maybe we don't think about straight away when we talk about tech and AI, but you're right. I mean, what will power the data centers, right? And I guess for Mark, you know, on the Singapore side, because we hear a lot about young investors saying, "Oh, I'm into the NASDAQ. I'm into S&P. I'm into Max 7 and US stocks." But on the Singapore side now, you know, with this push for the SGX, trying to revitalize our local stock market. How do young investors who want to get exposure to tech kind of play into that? Right.

[00:21:26]>> Yeah, it's a good question. Uh, unfortunately, uh, the Singapore index has its own structural limitations, right? So if let's say we look at the straits times index unfortunately the kind of tech exposure there is uh not as large as the kind of US um and global >> um it's still very much heavy in financials and um reads and perhaps you can argue that maybe some of the reads u may be a proxy play to AI but even then if you really look closely at some of the reads underlying is not other than maybe one or two reads that specialize on data centers you're not really playing the data center AI you're more residential and traditional commercial. So unfortunately if SDI is the first port of call, unfortunately it hasn't been a very tech heavy uh let alone AI heavy.

[00:22:15]>> I'm hoping the NASDAQ um Singapore listing global listing. I hope that drives more um uh tech focused companies coming in.

[00:22:27]At the moment, I I'm not sure how it'll play out, but I think if it does, it's quite exciting for the Singapore Singapore market because as Mark said, you know, at the moment, it's primarily banks and REITs, but I'm hoping in 5 years time we will have more opportunities. I mean, a good example is is Grab. You know, Grab is listed in the US.

[00:22:45]>> It's a homegrown company. So, that's the natural fit. You know, everyone knows of Grab in Singapore.

[00:22:50]>> Yeah. But I think that's a really good point, right? The fact that right now, I guess the Singapore stock market is still quite traditional in that sense.

[00:22:56]Maybe we might even say conservative, but we never know, right? Like there are some new things on the horizon and the global listing board is definitely one that's very interesting.

[00:23:04]>> Yeah, maybe to add to your question, I would say for investors that are looking to invest in AI or tech beyond US and do they want to look at Singapore because Singapore is a comfort market. I think the the starting point for investors should be uh not to kind of constrain geographically but to really objectively look at fundamentals. Now, if the output of that leads to a lot of allocation in US companies, that's natural because you're ultimately not making a bet on US equities. You're making a bet on the companies that deliver AI and they have that mode and they have the fundamentals to do that. And it could be the case that I won't be surprised, it won't be entirely US tech. Um, you could have Asian tech companies as well. So, the semiconductor um you'll get a very big exposure in Asia. They're manufacturing uh in Korea, in Taiwan. You you'll find some names there. um you'll also find quite a few cloud providers um at a kind of a discount compared to the western cloud providers. So I wouldn't be surprised that if investors are kind of looking to get exposure u it won't be too US- ccentric. There will be quite uh exposure to US companies. They'll get some Asia companies but investors should not try and start constraining themselves to I want to find AI companies in Singapore or in Malaysia or in whatever geography. Uh focus on the business model and fundamentals.

[00:24:24]>> Yeah. actually the two innovation hubs is US and Asia but they're developing in different manners right so um in in Asia for example this year alone you have seen massive rise from the likes of Samsung and SKH so the Korean market has been on fire um Taiwan has also seen a massive move higher driven by TSMC so Korean Taiwan historically has been plugged into the global tech value chain but Hong Kong China also if you see the innovation that is taking space especially in the consumer tech space it's massive I mean many of these companies I mean we talk about the mag 7 but we have you know tenscent Alibaba they're equally big it's just that the the way they target the market is very different so uh especially in the world that we live in where there is a lot of geopolitical um fragmentation I think increasingly what we will see is a global exchina story where it's largely the US companies and then you have got a China based uh ecosystem China and Asia- based ecosystem where the Asian companies will dominate and frankly if you want to play a global story I agree you shouldn't just restrict yourself to specific markets you should have exposure to both >> h and right now I mean speaking of all the geopolitical tension right and the volatility just you know in the political space globally do you think then it is especially wise to geographically diversify your portfolio right I know you said you know we don't look at where the companies are first we look at the company itself but is this also something that investors can consider.

[00:25:53]>> Absolutely. I I think um in in today's market we have a saying diversification is probably the only free lunch that we have >> because that's the only way you can mitigate risk. Uh we don't know what's going to happen in the world. uh but one way you can diversify and we encourage most of our investors including my personal portfolio you know I try to have um uh US there's no getting away from the US it's it's so large um also have Asia but also within sectors you diversify and if you're buying individual stocks definitely spread your uh bets don't just have 50% of your portfolio in Apple I I know Apple is a great company but I wouldn't put 50% of my portfolio in any stock >> m Okay. Yeah, that's really good advice as well. I think so. We have definitely touched on why tech is still attractive, right? Um, and in the long time, would you say that the tech sector is still promising, you know, besides the AI wave, which I think now we kind of see that's not really just a trend, right? I mean, it kind of seems to be here to stay, but are there other kind of driving trends that will cause tech to be here to stay?

[00:26:57]>> Yeah.

[00:26:57]>> Okay. So for me um I think the innovation and adoption of tech is only going to get bigger and bigger and bigger.

[00:27:06]>> Tech in many ways has become a necessity for all of us. Right? Uh if you see how we used to do banking, how we used to do do transportation, order our meals, everything is dependent on tech today.

[00:27:17]Right now will the journey be smooth from an investment standpoint? Of course not. There's going to be ups and downs.

[00:27:23]Will the same set of companies the Mac 7 exist 10, 15, 20 years uh down the line?

[00:27:28]I don't know. Some will, some may get disrupted. We have seen this, you know, like when I started university, the first mobile phone I had was in Ericson.

[00:27:36]>> Okay.

[00:27:37]>> Um I don't know if your viewers have used Erikson, but Eriken and Nokia were the two largest players and they were going to revolutionize the world. Then came smartphones and today it is dominated by Samsung and Apple. Same thing. AI is one of those generational shifts that we're going to see. It will lead to disruption in technology as well. Um there will be new businesses that come up. You know, open AI, anthropic, I don't know how it'll look, but 100% it's going to um have an impact. Uh and so having exposure to tech tech makes sense, but I can't tell you for certainty whether the same set of companies will be there um uh 10 years uh down the line. M okay >> just to add on to that I think even >> tech as an investment is >> um not the entirely right way because every other industry would have some tech >> element to it so you for example take a name of JP Morgan um it's categorized as financials is a bank but they are one of the biggest uh banks that adopt AI in fact DBS uh is is is a financials and they have a big AI wave and there is a tech element to it even if the investment category is financial. So it's almost not very helpful to say I want to invest in tech because actually if I'm going to invest in DBS bank, JP Morgan Bank and even healthcare companies Eli Lee and and and and Nova Nordis all of them are adopting AI in their own industry verticals that is is almost inevitable. Then the ultimate question then is um do I want to have a sectoral allocation or do I want to stick to actually researching the companies be sector agnostic but really understand how an industry is adopting tech or not even adopting tech for the sake of tech but they're using tech to strengthen their world and you wouldn't be so conscious to say I'm investing in the tech sector you're you're just investing in companies that are innovating themselves staying relevant as well. M yeah I think healthcare is a great point you bring up right because we talk about aging society and all that and increasing demand for healthcare and that's definitely never something that's going to go away and I mean met you know right so many healthcare companies including AI now in their proposition so yeah that's a really good point um I think we've talked a lot about young investors right and how they can build their portfolio with having tech but not solely around tech so I mean you know say like if somebody's 25 I only have $500 a month to invest maybe even less than that how then can I pick stocks or what sort of instruments can I use to ensure that my portfolio is still diversified but also has exposure to tech since it's such an exciting sector.

[00:30:09]>> Yeah. So, uh for me I would say if you have $500 a month you should allocate that $500 every month either into a ETF or a fund or in DBS we also have readymade portfolios uh through Digi portfolio that you can uh pick and you can choose your risk profile. You can be more aggressive or you can be less aggressive depending on your uh tolerance. So but but the main thing is don't just go lump sum. Try to build it up over time and build up that nest egg.

[00:30:37]Um because um that is the right way in my opinion to to invest for youngsters.

[00:30:42]I wish I had started investing much earlier um uh in hindsight. Um so to your viewers I would say you know start early.

[00:30:52]>> Okay. Yeah. Yeah, I think just now you mentioned dollar cost averaging as well, right? Which is exactly what Supra is talking about. Maybe you can explain a bit what dollar cost averaging is.

[00:30:59]>> Yeah. So, dollar cost averaging simply means that you don't uh invest uh a big amount. Let's use a worked numerical example. If I have um $10,000, uh I don't invest all $10,000 today. I kind of do a systematic plan to invest $500 every month until I've invested all 10,000. So maybe you invest the full $10,000 over the next 3 years. So that's an example of dollar cost averaging because every time you put your trunch of $500 um you would have either a different price point. Sometimes it's even better for you if the market is going down and you're doing this so you're entering at a cheaper price. Um so that's the idea of dollar cost averaging. So I think I really echo what Subra has said that really with $500 you can start investing and um you can do that through DBS. can even do it with us. Recently, Stashaway launched a regular investing campaign to exactly encourage this behavior. So, if you start a regular investing plan, you'll get uh some u promotions um and and and and uh rebates as well. So, uh we want to encourage such behavior. The beauty of doing that is you're not only building a diversified portfolio through exposure, but you're diversifying through time, right? You're you're not you're not batting all in one price, which can work both ways. If you if if from that price onwards um it goes one direction it's better to invest lumpsum but that's that's not a certainty. So it gives investors a easier way to have a more structured way of at least gaining exposure >> and it also takes away emotion.

[00:32:33]>> Yes. I was going to ask yeah how do you have that discipline right to really put in 500 every month? What if this month there's a crash and I'm like oh I'm >> so that's the beauty of it because um if you're doing it through a systematic plan it takes the emotion out of it. If you have put a lump sum, what will happen is if there's a crash, it's human nature. You will tend to sell.

[00:32:52]>> Yes.

[00:32:52]>> And then when the market rebounds, you will try to get back in.

[00:32:55]>> For a systematic plan, you're actually investing irrespective of market cycle because you're taking the view that over the long run, economy will go, earnings will grow and therefore share prices will grow.

[00:33:05]>> Right. Okay. Yeah, that's a great way of putting it as well. And I think we've discussed, you know, you mentioned DG portfolios or we used to call it robo advisor and robo portfolios, right?

[00:33:13]Yeah. So that's when a portfolio is curated for the investor so they do not have to for example stay up to date with every individual stock. Okay. Okay. And about ETFs maybe we can explain a bit about how ETFs work as well.

[00:33:24]>> Yeah. ETFs basically track uh an index.

[00:33:27]So S&P 500 as 500 stocks and ETF just tracks and mimics the index. It's a lowc cost way of getting involved in markets.

[00:33:36]Um actually ETF um you know when I started in my career ETFs used to be about 20 30% of the index. Today it's over half of the US market is ETF.

[00:33:47]>> So the way of investing and it's made it more accessible for uh people from all over the world to invest. Um so I would suggest just doing it through ETF. It's low cost. It gives you access to a broad index. It gives you access to all the companies that you talk about and it's naturally diversified because it's tracking an index.

[00:34:06]>> Wow. Thanks for that. I think we've had a really good, you know, rich discussion on tech investments and I think most importantly, right, we are saying don't go 100% into Apple. Don't just go 100% into like a huge tech or AI company.

[00:34:17]It's about diversification, seeing your risk appetite, right? How much you're willing to stomach and also to be disciplined in your investments.

[00:34:24]>> I would like to just uh add to diversification as a concept. Even though today we're discussing AI and I want to try and contextualize diversification in the context of AI because sometimes a lot of clients um ask what what we exactly mean by diversification >> there there there are a few forms of diversification. The first diversification is um stocks right as Subra mentioned not 100% in Apple you invest in a few companies but that's a kind of a company level diversification.

[00:34:55]The second is also more of a uh a theme diversification because even if you're investing in Nvidia, TSMC, SKH Highix, they're different companies but they're all semiconductors. So that's that's some level of diversification but not exactly right. So you even if investors want to invest in AI, how do you get a diversified AI um exposure is as um Subra alluded to across the three layers of AI. You don't just want to invest in in the hardware, the semiconductors. You want to invest in a mix of cloud software companies um hardware companies and companies attempting to adopt AI. So that's another level of diversification where you're not getting a common risk factor. You're not getting a common theme where if semiconductor as a whole suffers um your diversification is an illusion. So uh and the third level of diversification is okay beyond AI um AI should sit along other sort of core asset classes. uh one more diversification is time as I alluded to.

[00:35:56]So these are the four kinds of diversification that if in which it's not the most sexiest concept but it gives investors the comfort to gain exposure to important themes and not have to worry about is this the most expensive time and it's aligned to my own financial goals even if there are volatility. So I just want to leave um with your audience that you know diversification in AI has also a kind of different meaning a closer life to it as well.

[00:36:25]>> Yeah I think that's super important right I mean the fact that it is a more complex issue is not just about you know I see what people on Reddit are saying about this stock that's very exciting today and I buy into it but it's about really systematically building a portfolio right that's able to withstand whatever market crash or whatever bubble that you think might come. Okay that's a wrap for this episode of Hit Start on Record. Thank you, Subra.

[00:36:46]>> Thank you very much.

[00:36:46]>> And thank you, Mark.

[00:36:47]>> Yeah, thank you for having me.

[00:36:48]>> I'm Suen Tan. You can email us your thoughts on this issue or suggest another topic you'd like us to tackle on the show. You can also reach out to me on LinkedIn. And if you like to read my articles and ST's Head Start newsletter, all these links are in our podcast show notes. This episode is edited by Amiru Karim. Thanks for listening.