Global technology found.Am I too late?

TheTracker

I've not read this whole thread, but the parts I did smacked of "this will be big going forward so it will be profitable to buy it now" thinking. This fashion investing totally ignores valuation and makes no adjustment for how big investors think it will be in future which will at least in part be priced into the sector. For instance, if I am to invest in Tesla, the question isn't whether I think Tesla will be big (ok, bigger!) in future, it will be whether I feel the current price under-represents how big it will be in future.

Technology, in particular, is a pervasive innovation that will have broad effects on non-tech companies, beyond the valuation of technical companies themselves. Growth in retail, media, transport, whatever sector you select, over the last 2 or 3 decades, has been significantly driven by technology. It is great that Tesla might be able create a market of driverless lorries, but I can profit from that by holding transport stocks and not speculating on whether a fashionable subset of companies will supply other sectors. You invest in technology by simply being exposed to and diversified across all sectors.

Prism

Linton wrote: »

I agree with you about Amazon not being a technology company, and would argue that the same could apply to Google and Facebook which as far as their profitable business goes major in selling advertising space.

Is there any reason why an investor should buy funds that have large holdings in these companies in order to benefit from the supposed AI and block chain revolutions? Perhaps there should be a separate sector for companies that do almost all of their business online as they are very different to those that focus on the development of technology.

Its very hard to split these companies into categories. For example Amazon creates most of its revenue from its commerce website, but makes most of its profit from its technology and innovation. Its a world leader in the cloud and AI. Facebook is at the forefront of AI, network and datacenter design. Microsoft is clearly a technology company but its main competitors are Amazon and Google because they are all working in the same area - cloud, AI, software. Alibaba and Tencent are doing the same in China.They are all huge developers of technology and will most likely be the most profitable organisations for many years to come. Thats why I am overweight in technology.

TheTracker

Voyager2002 wrote: »

a core-satellite approach, choosing a core to provide reasonable safety and a number of different satellites to provide the possibility of high returns (and equally the chance of substantial losses). Or have I got it wrong somewhere?

If you wish to mix high and low volatility to maximise returns in a way that stays within your current volatility/risk appetite, well thats what the multi-asset funds like VLS are already designed to do, they usually already contain this mix in their asset allocation. You choose a higher level of multi-asset product if you want to add some more risk.

Instead, what you are likely trying to convey is an approach some people call "play money" or "mad money" in investing. It works for some but not others, and my feeling is that it is on the whole a dangerous practise.

It can work, because it can let you get any 'entertainment' buzz out of your system, and might even be profitable. Constrained to a small and fixed amount, it can allow you to think you have some ability to pick stocks or funds or have an edge in a sector, which can feel rewarding. It can even be an advantage if its disastrous, since its helped you not do it to your whole portfolio. And its a really good learning experience about how the market works. Another thing to talk about down the pub, too.

I suppose in a way even I do it, I invest directly in some EIS-eligible companies and psychologically might be using that tax advantage to lure me into taking higher risk in a sector I know well, but its only a very small part of my portfolio, I'm under no illusions and realise I could lose it all rapidly.

But it can be a very bad practise. If you do well, you can be tempted to apply it to more of your investments. You can start to believe your own hype that you can pick funds or sectors better than most. You can feel emotionally down if not successful. You can be sucked into doubling down when the price drops and you still believe in the sector, and you can chase what ever the fashion of the day is.

Whether or not you go down the route of play money is in large part based on your personality and appetite for gambling/risk. And as others have said, that's often inconsistent with the type of person who would choose a multi-asset fund in the first place.

BananaRepublic

dunstonh wrote: »

VLS is aimed at people at that believe in the passive philosophy. If you start making management decisions to involve more expensive and niche funds that bust the asset allocation then how does that fit with the passive philosophy?

I understand the core and satellite approach. However, that would typically involve multiple satellite funds to get you to the asset allocation you are after. I don't see VLS100 plus a tech fund as being similar to a typical core and satellite investor.

Surely people can choose what they like. Someone might choose the VLS100, not because it is a passive fund, but because it could form a solid backbone for their investments. They might then choose something more adventurous/risky such as a tech fund. It sounds as if the thought processes an IFA goes through would exclude this approach, unless this view is not typical of your trade.

Linton

BananaRepublic wrote: »

Surely people can choose what they like. Someone might choose the VLS100, not because it is a passive fund, but because it could form a solid backbone for their investments. They might then choose something more adventurous/risky such as a tech fund. It sounds as if the thought processes an IFA goes through would exclude this approach, unless this view is not typical of your trade.

The point is I think that having only one satellite fund perhaps chosen solely because media hype leads the investor to believe it will outperform significantly isnt a thought through investment strategy. A coherent core/satellite approach is likely to lead to a set of varied satellites that together create a portfolio more suited to the investors objectives than the core.

But yes people can choose what they like and hopefully learn from the consequences.

firestone

i can understand an IFA not recommending a higher risk satellite fund to somebody who has gone with a lower risk multi asset as that would not look good for them,from a giving advice point of view.But from a DIY point of view i can't see a problem with a small portion of fun money so to speak but it may depend on how much is invested in the main fund/funds in the first place as to how much fun it is.
But from a picking point of view what apart from tech/AI would people pick that is not covered by a global fund water,timber,gold,cyber crime? there's many to pick from

jimjames

firestone wrote: »

But from a picking point of view what apart from tech/AI would people pick that is not covered by a global fund water,timber,gold,cyber crime? there's many to pick from

I agree there are many. Things like private equity, property, healthcare, resources are just a few

firestone

Should own up -Have property in a pension but i went with Impax environmental markets some while back as "fun" money and looking at a timber etf at the moment from ishares which also has a property edge

donmaico

Voyager2002 wrote: »

Do you mean that few investors would want to combine a low-volatility investment with a rather high-volatility one? Because that pairing would make a lot of sense to me, and I like to think that I know what I am doing: a core-satellite approach, choosing a core to provide reasonable safety and a number of different satellites to provide the possibility of high returns (and equally the chance of substantial losses). Or have I got it wrong somewhere?

I cant see what is so confused about that.Then again I am not an expert

firestone

donmaico wrote: »

I cant see what is so confused about that.Then again I am not an expert

some do the same with cash and put say 5-10% in P2P