©Reuters
Investing.com — Big bets on big tech stocks have boosted returns during the current tech bull market, but now is not the time to chase performance and protect long-term assets before the market ultimately falls. It's time to diversify your investments.
“We believe investors with an overabundance of large U.S. tech stocks should consider diversification opportunities into Asian tech leaders and blue-chip companies in Europe and Asia,” UBS said in a recent note. “The current favorable financial environment will not continue indefinitely,'' he added.
UBS may feel that the obvious investment strategy is to invest too much in high-growth U.S. tech stocks with solid earnings growth prospects, but recent history shows that these stocks also outperform the broader market. This indicates that there is a possibility of a significant decline. During downturns, the need for a diversified portfolio increases.
Data from the UBS Global Investment Return Yearbook, which analyzes financial markets dating back to 1900, shows that portfolios diversified across 21 countries are 40% less volatile than the average single-country investment. .
But diversification doesn't just reduce risk or provide a cushion against wild market swings, UBS argues, it also “helps you catch winners.”
“We believe that diversification is the only way to avoid missing out on good companies, which is especially important in times of economic and technological change,” he added.
