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Some big names suffered massive stock losses in the week before they reported earnings.
Four companies – the parent company of Google Alphabet, AmazonFacebook parents Meta and Microsoft – collective pour more than 350 billion dollars from their market capitalization, a measure of the total value of all their stocks.
Apple was a bright spot, with its shares soaring on Friday after beating expectations.
According to Larry Adam, chief investment officer of Raymond James, investors who are worried about the technology sector can rest assured that the current change is not the same as the bust of 2000.
One key difference is that the companies in question are stronger now, with their earnings and, in some cases, dividends growing, he said.
When a number of companies hit their stocks, Adam says, the biggest draw is not to overreact.
But it would be wise for investors to watch their exposure.
The biggest names in pure tech – Apple, Microsoft and Passport — accounts for more than 45 percent of income in that field, according to Adam.
Alphabet and Metatechnically in communications services, which account for 53% of income in that sector. Amazon is a big player in the consumer discretionary space.
“Technology is more dynamic than before,” says Adam. “It’s in different sectors and sectors of the economy and the stock market.”
Ryan Viktorin, vice president and financial advisor at Fidelity Investments, said: “While investors may think they diversify by owning different funds, they can actually have multiple funds. overlap between those holdings — and more exposure to technology than they realize.
“It’s always about making sure you don’t end up with a skewed portfolio,” says Viktorin. “You want to always come back to the question ‘Do I have the diversification in the timeline I have, the risk tolerance I have, and for the goals I’m trying to achieve?'”
Here’s how to do it.
Assess your true portfolio risk
The increased volatility has led many customers to ask, “Am I okay?” Viktorin, a certified financial planner, said.
“The most important thing about an allocation or portfolio is getting to a place where you can keep investing no matter what,” she said.
Each investor’s true risk can vary according to their circumstances. For example, someone working in the technology sector has had to take significant risks outside of their portfolio because their income depends on the sector, Viktorin said.
Ideally, you should allocate enough diversity so that you can weather the recession and rise to success on the other side, she says.
Value search
According to Mark Hebner, president of Index Fund Advisoran Irvine, California-based company that ranks 66th on CNBC’s 2022 list of 100 Financial Advisors.
To do that, Hebner said he prefers milder growth stocks to those below the value portfolio.
Growth stocks are typically companies with a high market-to-book ratio. While those stocks predict growth, stock values tend to be better, according to Hebner. Notably, technology stocks have pass value since the Financial Crisis, but there are signs Re-evaluation is underway.
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Since 1928, the return on US growth stocks has been 9.76% compared with 12.6% for value stocks. Furthermore, value stocks also outperformed growth in international and emerging markets.
“You want to design a stock allocation that gives you exposure to a small value in your allocation,” says Hebner.
Funds that provide exposure to small-value indexes, through Russell in the US and MSCI internationally, can help with that, Hebner said. Fund providers to look to may include iShares, Vanguard and Dimensional Fund Advisors, he said.
