Investing.com -- Big bets on big tech have bolstered returns during the current tech bull run, but now is not the time to continue chasing performance, but rather diversify to protect long-term wealth before eventual market turn lower.
"We think investors with excessive US big tech holdings should consider diversification opportunities in Asia’s tech leaders and quality companies in Europe and Asia," UBS said in a recent note, adding that "current favorable financial environment won’t continue indefinitely."
It may feel like the "obvious way to invest is to overallocate to high-growth US tech stocks which a have solid profit growth outlook," UBS says, but a recent look at history shows these stocks may also slump by more than the broader market during selloffs, stoking the need for diversified portfolio.
A portfolio diversified across 21 countries would have experienced 40% less volatility than an average single-country investment, data from UBS Global Investment Returns Yearbook showed, which analyzes financial markets dating back to 1900.
But diversification doesn't only reduce risk, or provide a cushion against a wild swings in markets, but "helps catch the winners," UBS argues.
"Diversification is the only way to ensure that one does not miss the outperformers, and we believe this is particularly important in an era of economic and technological change," it added.