We love technology stocks, right? They’ve performed spectacularly over the past nine years.
But…technology stocks will lead the next stock market crash, much as they did when the dotcom bubble burst. That’s why investors shouldn’t be tempted to build portfolios with growth stocks or tech stocks…especially now.
Yes, such stocks have performed spectacularly over the past decade, easily trouncing plain vanilla index funds and indexes comprising value stocks (value stocks are cheap stocks that fewer people want).
But we need to be wary of “spectacular performers” because sectors that defy gravity with rocket fuel eventually fall out of favor (often painfully) as another sector takes center stage. That other sector will likely be “value stocks.” Sometimes value stocks beat tech (and other growth stocks).
Other times, tech (and other growth stocks) beat value stocks. But–and this might surprise you–value stocks have a long-term record of beating growth stocks over time. Who knew that something so “not sexy” has outperformed the sexy.
Nobody knows when to jump from “growth” to “value” so it’s best to keep things simple. Follow one of the model portfolios in my book. Millionaire Expat. Add money every month or quarter. Rebalance once a year, if needed. And don’t mess around. If you want to read more about the current state of growth and value stocks,
Image by Pixabay
I explained it here in my AssetBuilder column