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Investors: Beware Of The Disruptors

Investors BewareOfTheDisruptors B

Apple, Amazon, Google and Facebook have replaced Exxon, GM and GE as the largest companies in the world. In my opinion, Apple is fast approaching a market capitalization of $1 trillion.

Tech Companies Changing The Way We Live, Work, & Communicate

Think pieces continue to be written about the Amazon Effect and how the company that started as an online bookseller is now dominating online sales of just about everything and in the process revolutionizing how we shop. Google has moved from online search to driverless cars and Facebook is evolving from a networking site to a distributor of creative content. Together these technology companies--all flush with cash--are changing the way we live, work and communicate.

They are also disproportionately pulling stock markets up so we are not getting a fulsome representation of what’s happening widely across economies. For example, when the Dow Jones Industrial Average, which is made up of 30 stocks, went from 22,000 to 23,000, just a few companies made up half of that jump.

Take A Moment To Gain Some Perspective

In this environment, it’s easy to get caught up in the upward momentum and want to be part of it, which is why it’s important to take a moment to gain some perspective and assess the bigger picture. Start by gaining an understanding of what the indexes represent. For example, the NASDAQ is primarily made up of technology stocks. The TSX is largely comprised of oil, gold and bank stocks. And the Dow Jones is price weighted, which means the higher priced stocks--which tend to be technology stocks today--have greater influence than lower-priced stocks.

For investors with diversified portfolios, this is the reason your investments have not achieved the same record highs. It’s also the reason these records are misleading because they don’t equate one to one with respect to your portfolio. In other words, disruptors disrupt the economy because they skew results in a certain direction. Right now that direction is up but that won’t always be the case--which is why you opted for a diversified portfolio. When the market declines--and it will--these same tech stocks will lead the selloff.

The best advice today: stay calm and carry on. Focus on why you are investing, not the headlines.

Call Me or Email Me

My approach to investing is straightforward. I study the markets, global economies and what’s happening within industries to be in a position to best help my clients find good quality investments that will help them meet their goals. I welcome you to call me at 416-332-3863 or email me at This email address is being protected from spambots. You need JavaScript enabled to view it..

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