Great Companies - Sell Signal?
Microsoft, Apple, Netflix, Tesla.
These are just some of the hi-tech companies that have produced significant stock gains in 2020. How much of this growth has been due to the underlying earnings of the company, and how much has been due to the exuberance of investors? In other words, how much of a company’s future growth is already built into the stock’s price?
The question many investors struggle with is, “How much of these mega-companies should I own in my portfolio?”
Take a moment and review research on this topic, produced by Dimensional Fund Advisors.
For Coffeehouse Investors, it makes sense to own these companies as you already do within a diversified portfolio of index funds and passively managed funds.
For investors who are contemplating larger positions within a portfolio, long term data suggests you proceed with caution.
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