Tech funds - too risky?

Shocking_Blue

Dear all,

Was just about to put some ISA money into this:

Legal & General Global Technology Index Trust I Class Accumulation

However, the same fund attracted some discussion in another thread, and the chart below pointed to the potential high risk of the tech sector. Not sure if anyone has any thoughts on this (potential tech crash to this extent). I know one of the reasons tech/comms has been cited is the Covid way of communicating/working online etc. I suspect post-Covid this will be a feature of future comms/work/edu etc, so see the potential for tech/comms to be a strong sector. Any thoughts (sorry if the question is naive - relative newbie). Thanks.

 

Shocking_Blue

...

El_Torro

I do wonder how much higher tech companies can go. Having said that I think it’s ok to have some of your investments in a tech fund, just not too large a number. 

Linton

A tech fund would be very risky if that is the only investment you have.  Between 2000 and 2002 the tech sector dropped about 80 % and only recovered to its 2000 level in 2017.   As the whole sector is much larger now such falls are much less likely but it wont necessarily be a comfortable ride.

Prudent people would only include a tech fund as part of a much broader set of investments.  For example, my higher risk growth portfolio is around 24% tech and 10% communications  both in a tech fund and as part of other funds - tech and communications are sometimes regarded as two different sectors although a tech fund could reasonably include both.

What happens during Covid or the next few years is irrelevent really.  If you invest at all you should be thinking long term - perhaps decades rather than years.

If you have no other investments you could always buy a tech fund for a bit of fun.  However if you were planning to invest seriously to achieve life-changing amounts of money perhaps you would be better advised to start off with something much broader based.

Shocking_Blue

Linton said:

A tech fund would be very risky if that is the only investment you have.  Between 2000 and 2002 the tech sector dropped about 80 % and only recovered to its 2000 level in 2017.   As the whole sector is much larger now such falls are much less likely but it wont necessarily be a comfortable ride.

Prudent people would only include a tech fund as part of a much broader set of investments.  For example, my higher risk growth portfolio is around 24% tech and 10% communications  both in a tech fund and as part of other funds - tech and communications are sometimes regarded as two different sectors although a tech fund could reasonably include both.

What happens during Covid or the next few years is irrelevent really.  If you invest at all you should be thinking long term - perhaps decades rather than years.

If you have no other investments you could always buy a tech fund for a bit of fun.  However if you were planning to invest seriously to achieve life-changing amounts of money perhaps you would be better advised to start off with something much broader based.

Thanks,
Have VLS 60/80 and HSBC Global Strategy Balanced as mains. Had two things in mind really with the above fund: tech/comms and ex-UK. Was also considering Vanguard FTSE Developed World ex-U.K. Equity Index Fund GBP Acc, which has a fair bit of tech/comms and no UK exposure (perhaps a safer fund?). The tech/comms exposure would be about 10-15% of total funds. Still, wouldn’t want a dot.com type loss of that. Talking years rather than decades to have it in there. Know it’s anyone’s guess so to speak.

Cheers.

coachman12

I only believe in tech shares as part of the way I balance my overall portfolio. Carefully chosen tech shares have to be there in a number of companies, but I have never seen them as a pivotal influence within the portfolio as a whole.
I would never rely on tech shares as my sole investment or even a significant part. On top of that, I do think that tech prices have peaked or are close to it. I do apologise for the negativity, Shocking_Blue, and I sincerely hope I am wrong as you seem ready to proceed as outlined in your Opening Post. The very best of luck ( and that's what so much of this game is all about ). 

Shocking_Blue

coachman12 said:

Shocking_Blue, and I sincerely hope I am wrong as you seem ready to proceed as outlined in your Opening Post. The very best of luck ( and that's what so much of this game is all about ). 

Thanks. Nope, backing off if anything else. Cheers.

george4064

Shocking_Blue said:

Linton said:

A tech fund would be very risky if that is the only investment you have.  Between 2000 and 2002 the tech sector dropped about 80 % and only recovered to its 2000 level in 2017.   As the whole sector is much larger now such falls are much less likely but it wont necessarily be a comfortable ride.

Prudent people would only include a tech fund as part of a much broader set of investments.  For example, my higher risk growth portfolio is around 24% tech and 10% communications  both in a tech fund and as part of other funds - tech and communications are sometimes regarded as two different sectors although a tech fund could reasonably include both.

What happens during Covid or the next few years is irrelevent really.  If you invest at all you should be thinking long term - perhaps decades rather than years.

If you have no other investments you could always buy a tech fund for a bit of fun.  However if you were planning to invest seriously to achieve life-changing amounts of money perhaps you would be better advised to start off with something much broader based.

Thanks,
Have VLS 60/80 and HSBC Global Strategy Balanced as mains. Had two things in mind really with the above fund: tech/comms and ex-UK. Was also considering Vanguard FTSE Developed World ex-U.K. Equity Index Fund GBP Acc, which has a fair bit of tech/comms and no UK exposure (perhaps a safer fund?). The tech/comms exposure would be about 10-15% of total funds. Still, wouldn’t want a dot.com type loss of that. Talking years rather than decades to have it in there. Know it’s anyone’s guess so to speak.

Cheers.

The VLS and HSBC funds are indeed broad based funds which Linton referred to and will have exposure to the big tech names, however holding a tech fund as a satellite holding (VLS/HSBC funds being your core holding) would be perfectly reasonable. I would say no more than 10% of your portfolio in the niche tech fund, and the remaining 90% invested in your core Vanguard/HSBC funds. Ofcourse you could put more in the tech fund if you really want to ramp up the risk but personally I wouldn't go anymore than 10% allocation.

Shocking_Blue

george4064 said:

Shocking_Blue said:

Linton said:

A tech fund would be very risky if that is the only investment you have.  Between 2000 and 2002 the tech sector dropped about 80 % and only recovered to its 2000 level in 2017.   As the whole sector is much larger now such falls are much less likely but it wont necessarily be a comfortable ride.

Prudent people would only include a tech fund as part of a much broader set of investments.  For example, my higher risk growth portfolio is around 24% tech and 10% communications  both in a tech fund and as part of other funds - tech and communications are sometimes regarded as two different sectors although a tech fund could reasonably include both.

What happens during Covid or the next few years is irrelevent really.  If you invest at all you should be thinking long term - perhaps decades rather than years.

If you have no other investments you could always buy a tech fund for a bit of fun.  However if you were planning to invest seriously to achieve life-changing amounts of money perhaps you would be better advised to start off with something much broader based.

Thanks,
Have VLS 60/80 and HSBC Global Strategy Balanced as mains. Had two things in mind really with the above fund: tech/comms and ex-UK. Was also considering Vanguard FTSE Developed World ex-U.K. Equity Index Fund GBP Acc, which has a fair bit of tech/comms and no UK exposure (perhaps a safer fund?). The tech/comms exposure would be about 10-15% of total funds. Still, wouldn’t want a dot.com type loss of that. Talking years rather than decades to have it in there. Know it’s anyone’s guess so to speak.

Cheers.

The VLS and HSBC funds are indeed broad based funds which Linton referred to and will have exposure to the big tech names, however holding a tech fund as a satellite holding (VLS/HSBC funds being your core holding) would be perfectly reasonable. I would say no more than 10% of your portfolio in the niche tech fund, and the remaining 90% invested in your core Vanguard/HSBC funds. Ofcourse you could put more in the tech fund if you really want to ramp up the risk but personally I wouldn't go anymore than 10% allocation.

Yep. Sounds sensible, and what I was thinking. Still a bit put off though re the niche L&G tech fund, bearing in mind the comments above. Maybe stick to the broad-based stuff. Cheers.

[Deleted User]

It's not a "niche" fund, 33% of holdings are in the two biggest companies in the world. The share price of these two companies has comfortably outperformed the fund, and either is twenty times as big, so my suggestion would be to invest in them alone with the 10/15% you had earmarked for the fund.
Always the chance either or both companies could tank but, if that were to happen, it would impact all our investments. It's not 2000 and "tech" (whatever the definition of that is now) is not a bubble.  

Shocking_Blue

ZingPowZing said:

It's not a "niche" fund, 33% of holdings are in the two biggest companies in the world. The share price of these two companies has comfortably outperformed the fund, and either is twenty times as big, so my suggestion would be to invest in them alone with the 10/15% you had earmarked for the fund.
Always the chance either or both companies could tank but, if that were to happen, it would impact all our investments. It's not 2000 and "tech" (whatever the definition of that is now) is not a bubble.  

Thanks for clarifying. Was also thinking the 2000 dot.com scenario was something quite special in its own right, which was sort of pushing me in the direction of the fund, along with Apple, MS and FB being top holdings - not too big to fail as such, but still....
It's just that this fund has been talked about in the wider context of tech, and the dot.com example of tech. I think my post was partly to examine the relevance of these wider tech/dot.com comments to this particular fund...