Throughout the covid-19 pandemic, we've seen the gap widen between the highly prized tech stocks, which have thrived in a lockdown environment, and the rest of the global shares. We've seen video calls, online shopping, and even online socializing go from strength to strength in a relatively short space of time. Meanwhile, more traditional businesses that rely on physical presence and close interactions have been battered and bruised. An example of this is Simon Property Group – the largest owner of US retail property – who when compared to the returns seen by Amazon, show how massive the divergence in share prices has become.
Table 1: Simon Property v Amazon Recent Returns
The big question is, "does the current environment provide a true reflection of the new normal?" Due to the way people process current events, thinking they'll continue far into the future, many might believe that 'this time it's different'. But those four words are some of the most dangerous ones in the investing world. While hindsight is 20-20, as investors, we follow a strict process and are resigned to the fact that we can't predict market events, good or bad, which keeps us steadfast in our approach.
Below is our current exposure to the most talked about tech stocks in our original and ethical plans.
You may ask, "Why are these weightings not higher?" and there are many reasons for this, some are detailed below.
We plant seeds to enjoy the fruit later
Despite the constant flow of news and performance monitoring, we do our best to stay focused on our long term returns and objectives. Even as seasoned investors this can be incredibly difficult, especially when prices are bouncing around and the future looks increasingly uncertain. As Warren Buffett says, successfully investing is simple, but not easy. We know how important it is to keep our feet on the ground and make sure that our process keeps us on course while looking for any signs of change in our long-term expectations.
We don't keep all our eggs in one basket
There's one exception to every rule, and the exception to no free lunches is diversification. At Wealthify, we don't buy into the idea of large and costly positions in individual investments. Instead, we prefer to hold a broad range of investments customized to everyone's values and risk preferences. We believe this gives us the best chance of meeting our objectives and avoiding unnecessary or permanent losses. Of course, if you get it right when selecting individual assets, which is rarely the case, the results could be great, but the risk of loss is equally, if not more, painful. This is an important consideration when it comes to investing hard-earned money. Again, hindsight is crystal clear, and we always avoid situations where we're betting the farm on individual shares.
We're always looking for a bargain
Our investment team always consider the price of the underlying investments as investment outcomes are determined by the price you pay, and today's price is relative to the future value of that asset. We're in constant communication with the managers of the underlying funds in our Plans to ensure they're purchasing the right kind of shares. Of course, like all of us, they're human and won't get it right all the time, but a big part of our process is to understand the pedigree and track record of our managers so that they're best placed to deliver strong performance.
Our process brings this together by seeking to meet long term goals by gaining exposure to a wide range of quality investments that provide good value. We constantly monitor each part of our process and Plans to ensure we are making your hard-earned money work for you!
Please remember that past performance is not a reliable indicator of your future results.
With investing, your capital is at risk, so the value of your investments can go down as well as up, which means you could get back less than you initially invested.