Billionaire wealth manager Peter Mallouk has 3,400 clients worth at least $25 million. Here's how he's telling them to navigate AI chaos.
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- Peter Mallouk says his clients are more diversified than ever amid AI's transformative impact on industries.
- AI's rise is causing unpredictable bouts of market volatility across stock sectors.
- Mallouk suggests investors diversify more than before, and avoid trying to rotate too often.
Peter Mallouk, the billionaire CEO of wealth management firm Creative Planning, says AI isn't like any past technology cycle — it's far more transformational, and that calls for investors to take action in their portfolios.
Mallouk told Business Insider that he's convinced AI is more impactful than other technological advancements by a long-shot, and the change it creates will likely be permanent.
"I think it's more than the internet, where the internet made everybody more efficient, or Microsoft with all their tools made everybody more efficient. This is something that removes 95% of the work in some roles. This is going to be truly transformative — like completely transformative."
That realization started to reverberate through financial markets this month, with AI panic hitting various stock sectors and a viral report from Citrini Research driving a sell-off on Monday.
Given the volatility and AI's unpredictable impacts on the market, Mallouk said that his roughly 3,400 clients worth at least $25 million are spreading their money out more than before.
Diversification is fairly basic advice that you'll hear from most money managers — the more you hedge your bets, the more likely you'll be able to preserve capital.
Yet, in today's environment, it's especially important, Mallouk said, as AI disruptions seem to be catching investors off guard everywhere.
"I think the smart money is more diversified than ever," Mallouk said, adding: "I mean, who would think that in the AI revolution, the big winners in the stock market would be energy and consumer goods? I mean, give me a break. You've got to be diversified."
How to diversify
As Mallouk sees it, being diversified today looks a little different for the average investor than it did in the past. While the traditional 60% allocation to stocks and 40% allocation to bonds has long been the standard portfolio, Mallouk said he prefers a broader, less conservative approach.
Specifically, he said to:
- Lean more into equities than a 60% allocation, having exposure to both non-US stocks and stocks across all US sectors. Funds that offer exposure to these trades include the Vanguard Total World Stock ETF (VT) and the Schwab U.S. Broad Market ETF (SCHB).
- Outside of stocks, have minority positions in fixed income, and in some alternative assets, like real estate, gold, private equity, and private credit. Some ways to gain exposure to these trades include the Vanguard Total Bond Market ETF (BND), the iShares Global REIT ETF (REET), the SPDR Gold Shares ETF (GLD), the Invesco Global Listed Private Equity ETF (PSP), and the BondBloxx Private Credit CLO ETF (PCMM).
Mallouk advises investors to be strategic, think long-term, have money in a variety of assets, and simply let it sit there. He cautioned against the urge to fine-tune one's portfolio too much.
"You get burned rotating around in things like this," he said. "Spread the eggs out, and things will turn out fine."