Re-Diversifying My Investments

 I haven't talked much about my investments recently. Over the years, my 401k, Roth IRA and other investments have grown nicely. My strategy has been to pick a variety of mutual funds, mostly, and leave them alone. But I do keep an eye on them and in the last few years I've started to be more conscious of rebalancing my portfolio as I get closer to the age when I'll fully retire and start having to use that money. 

I've been more heavily weighted to stocks than what is traditionally recommended for someone my age, so I've been nudging things towards more conservative investments a bit, but it's been hard to do that in the last few years, when bond funds haven't been doing very well. Meanwhile, stocks have continued to hit new heights, despite some bumps in the road-- that makes them hard to give up. But today I read a very interesting article that made me decide it was time to take more action:

Your "Safe" Stock Funds May Be Riskier Than You Think

The gist of it is that even if you think holding mutual funds means your investments are diversified, you actually probably have a lot of eggs in just a few baskets because of the gains in tech stocks due to AI. I'd been aware that several big tech stocks were becoming a bigger and bigger share of the overall market, but reading this article was the impetus for me to dig deeper into my own portfolio to see how much of it was based on Nvidia, Apple, Amazon, Alphabet/Google, Microsoft and Meta. I dug into every fund I hold and looked at what their top holdings are, totaled up the percentages held in these companies, and then applied that percentage to my total dollar value in each fund. I totaled that up and calculated what percentage it was of my total investments, and found the result a bit scary:

Over half a million dollars, or about 19% of my investments!

To me, at my age (late 50s), it's too much to have riding on these 6 companies, even if they've been doing really well. (I probably should also have added Tesla into my calculations, as it appeared in many of those top holdings lists, as did Broadcomm.) I was also concerned when I read some recent analysis about circular investments among these companies. Bloomberg had an article about it, which seems to be paywalled, but you can see a graphic from the article here, and there's another interesting visualization of the situation here. Some people think there's enough fundamental promise in AI that this will all be fine, or that if things go south, it will hurt smaller startups the most, but it feels a bit too Ponzi-scheme-ish to me. If I was younger, I'd be more inclined to ride it out, but I'd rather play it a little safer.

Most of my exposure is in one big Fidelity fund where I have almost $600k invested. So I decided to just lop some of that off, and move $200k of that into 5 other funds I already hold in smaller amounts, a mix of international stock funds, mid-cap stock funds and bond or blended funds. Even this probably doesn't  rebalance me as much as I need, but it's a start. I'm harvesting some gains now, and maybe I'll miss out on even bigger gains to come, but my gut tells me we could be heading for a time when some of this bubble may burst.

I also can't help thinking of the classic advice to invest in what you know and like. I know Amazon and while they seem pretty world-conquering, I don't like them and don't want to support them any more than I have to. I use Apple products and love them, but I'm worried they are losing their way a bit. I HATE the "liquid glass" redesign. I'm getting really sick of Facebook and Instagram, and more and more of my friends seem to be leaving these platforms-- or else I can never find their posts because they are buried under so many ads. And I have yet to find any instance of AI that I can really embrace-- mostly it seems like an inaccurate annoyance, and where it actually has powerful applications, it will just kill jobs. I've seen AI summaries of meetings I was in, and was impressed at how well it captured most things, but it wasn't good enough for me to not take my own notes, so what's the point? Though I will admit it could have been handy to be able to speak to my computer and say "exchange $200k of my Fidelity Growth fund and reinvest it in $40k of fund X and $40k of fund Y..." etc.

Anyway, that's where my head's at today on a very chilly Sunday! We'll see how it goes.

And as usual, all caveats apply that this is not financial or investment advice, I'm not a finance or investment professional, etc. Just sharing my personal thought process.