Should I be worried about AI and my investments?

Just want to validate that the news around AI has been A LOT lately. I'm not going to lie and say I haven't been caught doom-scrolling in the middle of the night to try and figure out what's actually a real threat and what's not. SO you're not crazy for asking and/or thinking about this. Let's talk about each of your fears.

The fear of AI hacking the market. The reality is the stock market is not one system that can be hacked and crashed from the outside. It is a massively distributed network of exchanges, clearinghouses, brokerages, and regulatory systems with layers of security, redundancy, and oversight built in. The NYSE, NASDAQ, and every major broker have cybersecurity infrastructure that is among the most sophisticated in the world bc the entire financial system depends on it.

So yes, there could be a market downturn related to AI disruption, but an acute AI hack event that crashes everything overnight like we're in I, Robot is highly, HIGHLY unlikely.

This has helped me a lot over the years - the stock market has survived not one, but TWO World Wars, the great depression, the 2008 financial crisis, a global pandemic and like 3,000 other moments in history when everyone was saying this time was different. It has ALWAYS recovered (she's resilient), and that track record should matter to you.

If you want to keep more cash liquid right now, that's a personal call. A 6 month emergency fund is what I recommend for a good reason. But some people in less stable industries or with higher monthly expenses feel better with 9 to 12 months.

What I do NOT want you to be doing is keeping years of extra cash in a HYSA as a permanent hedge against a fear that has never materialized. That cash is losing purchasing power to inflation every single day it sits there earning 4% while the market historically returns 8 to 10% annually over the long term.

You cannot let fear dictate your financial strategy. You're allowed to be more cautious, but it can't be debilitating.

Now getting into your actual situation. I just wrote a newsletter this week on where to keep your money for specific life events you're planning for. Read it here. But the TL;DR:

• Money you need in under 2 years: keep it in the HYSA.
• Money for the house in 5 to 7 years: this is the interesting bucket. 5 to 7 years is long enough to invest some of it but short enough that you don't want to put it all in the market and risk a bad year right before you need the down payment. A mix makes sense here - some in a HYSA or CDs, some in a conservative investment account. As you get closer to the 5 year mark you gradually shift more to cash so it's protected.
• Money beyond that: if you have extra after your emergency fund and your house savings, that goes in the market. A Roth IRA is the perfect starting point - $7,000 a year, tax free growth, and you can pull your contributions out penalty free if you really need them in an emergency.

Every first time investor feels the fear of what if's. I did, believe me. If I were to do it over again, I would start small - put $500 in a Roth IRA in a simple index fund. Watch it for a few months. Get comfortable with the fact that it will go up and it will go down and that is completely normal and not a reason to panic and then start adding more.

Hang in there, we're going to be okay and the robots are not coming for our Roth IRAs!!

xx

Just want to validate that the news around AI has been A LOT lately. I'm not going to lie and say I haven't been caught doom-scrolling in the middle of the night to try and figure out what's actually a real threat and what's not. SO you're not crazy for asking and/or thinking about this. Let's talk about each of your fears.

The fear of AI hacking the market. The reality is the stock market is not one system that can be hacked and crashed from the outside. It is a massively distributed network of exchanges, clearinghouses, brokerages, and regulatory systems with layers of security, redundancy, and oversight built in. The NYSE, NASDAQ, and every major broker have cybersecurity infrastructure that is among the most sophisticated in the world bc the entire financial system depends on it.

So yes, there could be a market downturn related to AI disruption, but an acute AI hack event that crashes everything overnight like we're in I, Robot is highly, HIGHLY unlikely.

This has helped me a lot over the years - the stock market has survived not one, but TWO World Wars, the great depression, the 2008 financial crisis, a global pandemic and like 3,000 other moments in history when everyone was saying this time was different. It has ALWAYS recovered (she's resilient), and that track record should matter to you.

If you want to keep more cash liquid right now, that's a personal call. A 6 month emergency fund is what I recommend for a good reason. But some people in less stable industries or with higher monthly expenses feel better with 9 to 12 months.

What I do NOT want you to be doing is keeping years of extra cash in a HYSA as a permanent hedge against a fear that has never materialized. That cash is losing purchasing power to inflation every single day it sits there earning 4% while the market historically returns 8 to 10% annually over the long term.

You cannot let fear dictate your financial strategy. You're allowed to be more cautious, but it can't be debilitating.

Now getting into your actual situation. I just wrote a newsletter this week on where to keep your money for specific life events you're planning for. Read it here. But the TL;DR:

• Money you need in under 2 years: keep it in the HYSA.
• Money for the house in 5 to 7 years: this is the interesting bucket. 5 to 7 years is long enough to invest some of it but short enough that you don't want to put it all in the market and risk a bad year right before you need the down payment. A mix makes sense here - some in a HYSA or CDs, some in a conservative investment account. As you get closer to the 5 year mark you gradually shift more to cash so it's protected.
• Money beyond that: if you have extra after your emergency fund and your house savings, that goes in the market. A Roth IRA is the perfect starting point - $7,000 a year, tax free growth, and you can pull your contributions out penalty free if you really need them in an emergency.

Every first time investor feels the fear of what if's. I did, believe me. If I were to do it over again, I would start small - put $500 in a Roth IRA in a simple index fund. Watch it for a few months. Get comfortable with the fact that it will go up and it will go down and that is completely normal and not a reason to panic and then start adding more.

Hang in there, we're going to be okay and the robots are not coming for our Roth IRAs!!

xx