Tech is Over Valued!
There has been a lot of pundits, experts, and even members of the Islamic Finance community saying that tech is overvalued. It’s too high, it’s going to crash, we’re in a bubble. Other than the fact that this statement is going to get headlines, clicks, and responses I do not believe there is much to worry about.
Why?! The market, the prices, gravity, the moon, trade wars with China, covid-19… there are always going to be a million excuses why the market is doing poorly. There is always going to be the need for attention-grabbing headlines. Nobody wants to hear everything is going to be fine. That is no fun. Instead, doom, gloom and the fact that your investments are going to go to zero is a far more attractive story.
Here is my take. Tech is not overvalued. Could it go down in the short-term as a sector? Yes. Will it go back up? absolutely! The reality is our world is becoming more and more digital. Every day we are surrounded by technology. The reason Covid-19 was not a complete economic disaster was because of technology. People could still work via zoom. People could still buy and sell via e-commerce, people could still maintain a level of productivity even in a Global lockdown.
If you are a long-term investor limiting your exposure to tech is a mistake. If you had invested in the Fidelity Global Technology Innovators fund in 2010 you would have seen average returns of 20% per year. Can you honestly say we are going to be less reliant on technology in the next decade? Any pundit who tries to make this case is a fool. The two sectors I see as winners over the next 10 years are technology and renewable energy. Everything else may still be profitable (not oil) but they will not grow the way tech and renewable energy will in the next decade.
What should you do?
As always, it depends. If you have a short period of time before you need your money, I would limit my exposure to tech and volatility altogether. However, if you do not need the money for 5-10 years (i.e. reitrement savings, kids education, etc) then I suggest maintaining some technology exposure in your portfolio.