Even if we don’t explicitly choose to be overweight tech, most of our 401k’s are heavily exposed to tech, considering that FANG, Apple & Microsoft make up 25% of the S&P 500.
The NASDAQ-100 has had a remarkable run since 2003, having had only 1 negative year (2008, -41%) on a total return basis and 2 (2018, -1%) on a nominal basis.
Everyone’s moving to the cloud, and there are plenty of exciting new technologies on the way (autonomous driving, virtual reality, internet of things, etc. etc.)
The internet bubble popped in 2000 because it was being driven by a lot of lower quality companies. This time, FANG+ are generating massive profits and Facebook/Apple/Google are trading at 24 to 28 times earnings - high but not extravagant. And it took 6%+ interest rates to pop the bubble back then.
Many people, myself included, cannot conceivably think of a scenario or black swan event that could sink this industry & produce steep losses like in 2000-2 & 2008. But it‘s precisely times like this when it’s good to get defensive and hedge against downside risk ... yet in consideration of the above, hedging just feels like throwing money away.
What do you think? Are you hedging your tech exposure?
Submitted November 19, 2021 at 02:46PM by MarkusEF https://ift.tt/3kRuEvC
