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Adding US tech stocks to my portfolio right now: yes or no?

Andy Ross
·3-min read
Financial technology concept. Stock market crash.
Financial technology concept. Stock market crash.

US tech stocks have been in the headlines quite a bit. That’s because, after an amazing 2020 for the FAANGs and the wider tech-related investing world, 2021 has been tougher to date. This can be seen in the performance of the tech-heavy NASDAQ, which has fallen over 5% in just the last month. Although, it should be noted that, its longer-term performance is far stronger.

However, as a long-term investor, I’m not really all that interested in what’s happening right now. I’m more interested in asking is this an opportunity to add US tech stocks to my portfolio, and if so, how should I do it?

More exposure to these shares than I realise

In fact, like many UK investors, I already have some indirect exposure to US tech stocks. I have a Russell 2000 ETF, as well as an S&P 500 ETF, and I also hold funds holding tech companies.

This may cloud to some extent whether I want to add more US tech stocks to my portfolio.

When it comes to having US tech stocks in my portfolio I like going down the route of using a fund, trust, or tracker to get exposure to the US tech stocks. The reasons are that investing this way leads to a diversity of holdings, reduced risk, and there’s a manager monitoring the whole industry to try and find the very best, most innovative companies.

What’s causing US tech stocks to wobble?

Let’s be clear this is not a crash. Arguably there’s some frothiness in some of the valuations we’re seeing with some shares, but the problem primarily is not with the companies themselves. It’s far more to do with investor concerns over inflation, which tends to lead to value shares performing better.

Tech companies themselves continue to be innovators with strong potential for current and future profit growth, which should in turn serve investors well.

What’s the long-term outlook?

So for me the long-term outlook therefore for these kinds of expensive growth shares remains strong. Especially if I add them as part of a diversified portfolio.

Investors in the US in particular will continue to back these companies I think, even in an inflationary environment.

These shares face some risks, most likely from regulation, but also from their high valuations. Overall though for me the ability of big tech giants to innovate is exciting and could provide a boost to my portfolio.

That said, I’m not in any rush to add US tech stocks to my portfolio. I think there are opportunities in the UK both in value and growth stocks that I would add before stocking up on US tech shares. I will keep my eye on them, though. If valuations continue to fall I may pick up a trust that invests in US tech stocks so that I can benefit from future growth.

If I did decide to add I’d probably do it through a fund or trust, so I’m using a professional’s expertise to access the very best companies.

The post Adding US tech stocks to my portfolio right now: yes or no? appeared first on The Motley Fool UK.

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Andy Ross owns no share mentioned. The Motley Fool UK has no position in any of the shares mentioned. Views expressed on the companies mentioned in this article are those of the writer and therefore may differ from the official recommendations we make in our subscription services such as Share Advisor, Hidden Winners and Pro. Here at The Motley Fool we believe that considering a diverse range of insights makes us better investors.

Motley Fool UK 2021