Just for a moment, suppose that all valuations are justified and all the US mega cap tech companies are gonna match earnings growth expectations. At current valuation, that roughly translates to an average return for investors. But maybe they all slightly **outperform** expectations and bring investors another 5-10 years of US equity outperformance too
Fast forward those 5-10 years. Here's my question to you... Was it worth the risk? It might not be obvious whether we're in an AI bubble right now. But what **is** obvious (at least to me) is that we've entered a moment in history where the market is experiencing **extreme correlation**
With each new announcement of this or that multi-billion dollar contract between tech companies, index funds are losing their diversification. Any prudent investor knows their goal is not to maximize total return but to optimize **risk-adjusted** returns. I'm just gonna say right now that these mega caps ain't it
If you truly want higher returns, the way to do it would be to leverage up a risk-adjusted optimal portfolio rather than hold highly concentrated positions in a few mega caps which have done amazingly well in recent years
My advice? For any random year, I'd say just go with VT to get global diversification. But in this current moment of extreme correlation, I'd say go with AVGE to get global diversification but with a value tilt which effectively underweights the US mega caps
Edit: I will only be responding to relevant comments. Again, this post is **not** about whether the market will go up or down, but rather the tradeoff between future expected returns and recent increase in concentration risk. Lots of brain rot down there already, but hey that's Reddit for ya