If you’re retired, there’s a good chance that your portfolio is very “income” oriented. That is to say, focused on dividends and interest rather than capital appreciation. Even if you never specifically sought such a portfolio, your financial advisor may have put you in one based on the assumption that income is important to you as a retiree.
To an extent, this perspective makes sense. Retirees do have higher investment income needs than younger investors, and they’re typically less willing to bear risk. Still, it’s a mistake to think that a “retirement portfolio” needs to consist of nothing but bonds, utilities, and bank stocks. There is plenty of room for growth stocks in a retiree’s portfolio — though maybe at a lower weighting than a younger investor would hold them at.
Artificial intelligence (AI) stocks, in particular, have a place in every investor’s portfolio — including retirees’. While a retired grandmother with high recurring income needs is probably ill-advised to gamble a high percentage of her fortune on NVIDIA options, she might benefit from having more modestly valued AI stocks in her portfolio. In this article, I will explore how retirees can get some AI exposure in their portfolios without taking on undue risk.
U.S. stocks
One logical place to look for AI stocks is in the United States. Many of the world’s top AI companies are located there, and because there are so many of them, it’s possible to find ones that meet the needs of a conservative retirement portfolio.
Take Alphabet (NASDAQ: GOOG)(NASDAQ: GOOGL), for example. It’s highly entrenched in the market, being dominant in search engines (Google Search) and long-form video (Youtube). It is also one half of the global smartphone operating system duopoly, a distinction it shares with Apple. On top of that, it has promising smaller businesses that are growing quickly. For example, Google Cloud, which just became profitable last year and is growing its revenue at 28% year over year.
Google incorporates AI in all areas of its business, including search overviews, YouTube content recommendations, the Gemini Chatbot, and Google Cloud. Google is very much an AI stock, yet it’s also the kind of stable, entrenched company that merits a place in a defensive portfolio.
Canadian stocks
As for Canadian AI stocks, there are some very intriguing ones out there. In past articles, I’ve mentioned Kinaxis and OpenAI as AI stocks worth considering. They are definitely worth thinking about, though perhaps a little risky for a retirement portfolio.
As strange as it may sound, Royal Bank of Canada (TSX: RY) could be considered a retiree-friendly “AI stock.” People don’t usually think of Canadian banks as AI companies, but they are investing in AI every bit as much as the big tech companies are. They’re using AI in everything from task automation to trading to mobile cheque cashing. RY, in particular, was singled out as the third-place North American bank (first place in Canada) for AI adoption. The bank has been involved in AI research ever since 2016 when it launched the Borealis AI research institute. Borealis’s research is already bearing fruit, as RY has an AI trading platform that’s helping make better trades for clients.
You can rest assured that Royal Bank will keep making its business more efficient through the use of AI in the years ahead. At the same time, the stock is cheap, trading at 13 times earnings, and extremely entrenched in the Canadian market. These characteristics make it a core holding in many Canadian retirees’ portfolios. In this author’s opinion, rightly so.
