Portfolio Diversification Will Matter More Than Stock Picking by 2030: Here's Why I'm Spreading Across 11 Sectors Now
The stock market doesn't continue rewarding the same strategy indefinitely, and the time to switch from playing offense to playing defense is coming.
Overview
The past few years have been fantastic for investors willing to hold artificial intelligence stocks through their inherent volatility.
Since the end of 2022 (shortly after the launch of ChatGPT sparked an AI arms race of sorts), the so-called "Magnificent Seven" stocks like Nvidia and Alphabet have gained an average of nearly 250%, largely spurred by these companies' AI-driven growth. For comparison, the S&P 500 (SNPINDEX: ^GSPC) is only up a little less than 100% for this time frame, while removing the Magnificent Seven's stocks from the index dials the S&P 500's gain for this stretch down to only 60%.
Details
In other words, a small number of stocks are responsible for a huge part of the overall market's recent gains. You just needed to own some of them long enough during this time frame to benefit. Don't be surprised if this narrow leadership remains the case for a while longer, either, as the artificial intelligence revolution continues to mature.
Source
Originally published at www.fool.com.