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Sooo AMC.. who’s in?
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Listen dawg, don’t pretend like you know something special here. Just invest in the SP500 and chill. If you’re close to retirement, add bonds, otherwise it’s too far off in the distance for you to be worrying like this. If you’re so inclined, SP500 equal weight ETFs exist.
An AI downturn may come but it’s not going to be a 2000-style crash. In 2000 literal websites were IPOing with no profits or often meaningful revenue to speak of. These companies you’re referencing are ginormous proven corporations who may be overspending on AI right now, and that’s it. We may see a pullback eventually of up to 20% (or maybe not) but you’re not going to get wiped out staying in the SP500.
Worry instead about making more money and saving your money rather than where exactly you put it.
Mentor
I think this is a valid concern. AI and Big tech has been hugely profitable, but an AI bubble is a real possibility.
I haven’t changed much, but for years have held
investments in Europe, Asia, EM stocks and some REITS for close to half of my portfolio.
The returns have been less there last 10 years, but the diversification helps and chasing return is not always a good strategy.
Alternative could also be investing in an equal weight index.
Have begun to look at longer term portfolios, specifically transitioning to the Weird Portfolio but this is not because of a current condition (gold/inflation) this is a move as I enter the last 5 years of accumulation (hopefully).
Portfolio Charts has an interesting look at modern portfolio mixes.
Subject Expert
I'm not changing anything, because having an allocation to international equity means I am already diversified against this issue.
I've limited my exposure to commercial paper and am sitting in the sidelines, free cash in treasuries. I think we still have time but I don't want to risk timing the market.
40% of the equity world market is outside of SP500 , there are also equal weight and value etfs to balance out
Coach
Give it a go. Report back in 10 years. You understand it’s market timing even though you say it’s not, don’t you?
Coach
Ok, what percent of the total market are those companies? Using the op’s number of 1/3 of the s&p and assuming the S&P makes up about 80% of VTI, then the AI companies make up 26% of the total US stock market (ignoring other AI companies outside the S&P). Not a huge difference. If the op is basically invested in the S&P, then reallocating based on performance of ai companies is market timing. I don’t care if the op wants to market time but he/she should understand that is what they are doing.
Community Builder
"Diversify away from AI-hyped S&P giants with XRP—target 5% allocation for its $200T cross-border payment potential, is the Bitcoin people missed back in 2008
Just read a very interesting article about this topic a couple days ago. If you can’t view the article itself, there’s a podcast you can listen to or read the transcript which is what I did.
https://www.derekthompson.org/p/this-is-how-the-ai-bubble-will-pop