Doom scrolling and the next financial crash!

On-the-coast

I (& a few others where I work) have noticed that pretty much all the standard fund options our pension scheme presents us with are dominated by Apple MS Nvidia etc. their performance has been outstanding for the last few years but at some point the bubble will burst. Our view is that it’s better to ride the wave than not.. since we have time on our side.

Bostonerimus1

https://forums.moneysavingexpert.com/discussion/comment/82104967#Comment_82104967

The young investor should probably stay fully invested, but I think the middle aged and older investor might want to take a few gains now that the DOW is around 54k. There do seem to be lots of things pushing against economic growth and international trade right now…ie wars and tariffs…and I find it hard to see how the $trillions invested in AI will pay off. We've all seen how short term success attracts more and more money and that's how bubbles can be generated so, yes, diversification is key and I certainly think reducing exposure to Global tech might be prudent for people who are closer to the finishing line than the start. As a long time index investor that's not easy for me to say, but things do look awfully top heavy right now.

talexuser

I've been increasing dividends into the defensive trusts for some time, but it's like trying to time the market, how far do you go and miss out on the bubble while it still lasts? If the tech bubble bursts everything will fall, and you would have to be lucky to have changed to a different area that recovers quicker than the US, and be better off on the far side compared to sitting out the storm and waiting on the recovery. So global trackers are still the majority, having lived through many crashes over 40 years invested, a 50% fall will not be the end of the world, but I worry that extreme wealth and private equity are shaping the market, and the bank crash of 2008 was not a good sign for the future with effective taxpayer bail outs of too big to fail.

Bobziz

Did anyone read the article by Ramin at Pensioncraft in his weekly email about Nvidia and it's use of SPV's to fund and shift some of the financial risk associated with the AI build-out ? It's got my attention to the extent that I've been researching equal weight trackers. I'm not a fan of the increasing financial engineering going on. Haven't we been here before….

Bostonerimus1

https://forums.moneysavingexpert.com/discussion/comment/82105075#Comment_82105075

As I wrote, I've increased my cash allocation from 5% to 20% based on the current frothy nature of the markets. I will go higher if the credit markets start to pull back from AI related lending. I don't really mind if I lose some gains as I'm retired and don't need my DC pensions to grow.

Bostonerimus1

https://forums.moneysavingexpert.com/discussion/comment/82105114#Comment_82105114

The SPVs are part of my concern. I also read that OpenAI has had several executives leave recently and last week the Chief Revenue Officer left, which is interesting given OpenAI's near term goal of an IPO.

InvesterJones

https://forums.moneysavingexpert.com/discussion/comment/82105114#Comment_82105114

Then I'd also recommend watching his latest video (passive investing is changing) where he talks about concentration etc. and underperformance of equal weighted etc.

aroominyork

I've generally been 40%-50% US and am now c.40% ('the Linton portfolio'), driven by over-reliance on one geography and valuation concerns. The AI bubble element is also addressed by 15%-20% of my US being in small cap value (AVSG). I would like to say these are long-term allocations and not a response to current markets, but it's often hard to know the exact motivations for how your portfolio is allocated.

I don't really mind if I lose some gains as I'm retired and don't need my DC pensions to grow.

Same here - we probably have enough to see us through so can take our foot off the gas and worry less about a crash. Ramin (who would be rolling in it if he got £1 for every time he is mentioned here) recently wrote that he hit his retirement number so dialled back from 100% equities to 60% equities + 40% MMF.

Bobziz

https://forums.moneysavingexpert.com/discussion/comment/82105314#Comment_82105314

Thanks, yes I did see that and I'm not sure he's correct about the under performance. Yes over the last 2-3 years, but not historically if you compare something like SPY and RSP.

GeoffTF

I am doing almost nothing as usual. (I spent most of the morning doing it, but that was just moving a little money al collecting a couple of statements.) Equities 64.5%, cash and bonds 35.5%. Equities are global market cap, but with the UK at 15.2%. Weakening my diversification by thinning the US has never made much sense to me. The equity markets will crash, but nobody knows when or what the trigger will be.