In this article, we are sharing a video the team at Sterling & Law – Hampshire has published concerning US tech stocks and their recent notable fall in price.
This video is delivered by one of our independent financial advisers, George Rashbrook.
George has over 15 years of financial services experience and is on hand to answer any questions you may have.
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For more free educational content, head over to the Sterling & Law – Hampshire YouTube channel.
Tech stocks and why it’s important to diversify
There’s been lots of talk in the media this week about “tech stocks”. There’s a good chance you’ll have heard the acronym FAANG in relation to five of the US’ biggest tech companies. This refers to:
- Facebook (which has since rebranded as Meta)
- iPhone manufacturer Apple
- Amazon, the book shop that sells everything,
- Netflix, the lockdown entertainment service par excellence
- And Google, which is listed on the stock market under its parent company Alphabet Inc.
These five shares are often used as a barometer for what’s going on financially in the world of tech.
Some people argue that electric vehicle maker Tesla and computing giant Microsoft should also be included.
US stock market returns
If your investment portfolio has exposure to the US stock market, there’s a good chance you have some or all of these names in the mix.
Based on previous performance, over the past two years, you’d have been quite happy about that as they’ve all made huge gains.
This year, however all of these stocks have seen substantial losses. The worst affected is Netflix which, as of 26th January, was 48% down against its November peak.
Diversification is key
If you’re investing in the stock market you need to expect volatility. Every share will have periods where it goes down instead of up.
Where this becomes problematic is if your portfolio isn’t properly diversified.
- If you’re invested entirely in the US stock market your year has started badly.
- If you’re invested entirely in US tech stocks your year has started very badly.
- If you’re invested purely in Netflix shares you’re probably devastated.
Note: This article doesn’t constitute a stock tipping service. Nor are we providing any investment advice at all. Take independent advice before making any decisions with your money.
What these latest market developments, and some of the public reaction to them, demonstrate is too many people have been underestimating the value of diversification.
If you’re serious about investing and growing your money over the long term don’t put all of your eggs in one basket.
Don’t back only one horse. That’s not investing, it’s gambling.
Even if you have only a small amount of capital to invest there are ways of spreading that across different assets, different markets, different industries, different sectors, different geographical areas, different currencies, the list goes on and on.
If you’re unsure, take independent financial advice
If you’re not confident doing that alone, or you feel like you’d like to know more then take independent advice, put yourself in an informed position and plan ahead.
Find a good, local adviser and let their experience guide you.