Tech stocks like the US FAANG, including companies Facebook, Amazon, Apple, Netflix, and Alphabet (earlier known as Google), have hijacked investor interest for their stability and high earnings.
But is it wise to have one asset sector or industry take up more space in the portfolio? Is it ok for risk aversion and consistent returns?
These questions come up with assets that are consistently profitable and are also resistant to market headwinds. Assets belonging to consumer staples, money-rich companies, and disruptive technologies are always the ones dominating portfolios. In this article, we answer this critical question that every investor often deals with in their investment journey – whether to have a tech-heavy portfolio?
The answer is simple –It’s okay to have a tech-heavy portfolio as long as it serves your investment goals. Technology has become a dynamic investment and fulfills several financial goals, given its relevance in today’s world.
Technology is spearheading many changes globally, and it’s okay to dedicate a significant part of your capital to it. Here are a few benefits of technology investments that you must look out for if you, too, are juggling with asset diversification questions.
Current as well as future returns
Most technology stocks rise to the occasion when the markets start to turn topsy-turvy. It’s no wonder that some of the stocks with the most consistent performance have been from the technology industry. If your portfolio looks tech-heavy, you need to evaluate your asset makeup to ensure it gives you profits and reduces risks in the long term and not just in the short term.
Not all technologies and their stocks perform well; some are rare winners who may look promising in the current market environment but maybe weak contenders when the markets start to go down. Hence, evaluating each of your technology stocks is important to ensure that you have got the most resilient ones.
ShiftAltCap’s #AllInTech thesis recommends technology stocks with a consistent 3-year CAGR of over 32%. Worried about return on investment? Our pre-built stacks will ensure exponential capital returns. Not only are the stacks highly profitable, but they are also stable.
Strong Correlations
The world of technology is diverse. Every sector in the 21st century will have some form of technology aiding its products and services. Due to such omnipresent and dynamic nature of technology, different technologies have different correlations with other industries.
For example, the hardware and software industry has been a standalone contender but strongly related to global market conditions. These technologies deal with many businesses that offer a wide range of solutions. However, if you take new technologies such as biotechnology, their relevance is dependent on one or few specific industries.
Hence, even their stocks are at the mercy of industries that drive the growth of such technologies. The good news with such stocks is that the prices are not influenced by other technologies. For stocks that are heavily influenced by the ups and downs in the technology industry, they may need to be strong contenders on their own for their stocks to be able to be profitable.
Investors can track the correlated industry and decide on their tech investments. Either way, calculating correlations of your technology stocks with that of other industries will help investors to evaluate risks and profits.
Promising investment in potential innovations
Disruption is the key facet of technological innovations. We have witnessed such profound changes in our day-to-day lives with devices such as smartphones, air purifiers, and other smart gadgets. Investing in such technologies that drive our way of living will help investors to earn consistent and promising returns without having to worry about losses.
Another reason to invest in innovative technologies is their strong growth trajectory. Take, for example, the stocks of Alphabet or Uber a few years ago and their prices now. Calculate the upward graph, and you will see for yourself why technology is a path-breaker for the future and investors. And they are consistently innovating and expanding. Like Alphabet launched its driverless car, Waymo, that will disrupt the way we ride. How can someone resist such investment opportunities in companies with deep roots and flourishing, diverse projects?
Investors can approach investing in startups and innovations with technology. However, it’s always wise to conduct a thorough analysis before investing your capital in any new ideas.
For first-time investors, ShiftAltCap has a prebuilt stack of startup stocks and complete expert assistance to stay updated with startup investments. Our experts also help you understand the risks and opportunities associated with early-stage investments.
Technology as a consumer staple/utility stock
One of the reasons your portfolio is tech-heavy is because of the utility stocks or your investment in consumer staples is usually in technology stocks. Today, technology has become a need in our day-to-day lives, and technology stocks have become utility stocks. If this is the reason your portfolio is tech-heavy, then investors don’t need to worry about the skewed concentration.
However, it is important to evaluate the stock performance periodically and gauge the profitability of the technology stocks, even if they are utility or consumer staples investments.
A poorly diversified portfolio will not only keep you from earning returns but will also lead to capital loss. Many strategies can prevent your portfolio from flipping towards losses. One of the strategies is trimming positions while relocating to assets and stocks that are not correlated.
Investment in technology is a boon for you if you evaluate your portfolio’s internal correlations. Technology as an investment is beneficial to establish negative and positive correlations within your portfolio.
At ShiftAltCap, we help every kind of investor attain their investment goals. From HNIs to individuals just starting their investment journey – ShiftAltCap has experience working with various investors. Our pre-built stacks screen companies for cash position, market positions, and an optimal risk-reward scale.
Looking forward to starting your investment in technology? Get in touch with us today and earn attractive returns going up to 132% on your capital.
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