Key insights
- A European investor is concerned about their tech-heavy portfolio and potential USD devaluation. They are seeking advice on diversification, particularly regarding currency hedging and bond ETFs. The portfolio's exposure to a potential 'AI bubble' burst is also a concern. The investor's questions highlight the challenges of international investing and the need to consider currency risk when allocating assets.
I'm not going to do the "doomer post", but indeed the market has been heating up quite a bit. I'd like to diversify and possibly miss on some gains, but lower the risk of loss.
Right now my portfolio is relatively heavily tech, although mostly ETFs.
I own:
- 10% GOOG - 25% QQQ - 23% SPY500 - 22% World - 20% cash/bonds
Would you call this tech-heavy?
What would be your estimate of a downturn from this portfolio, were the "AI bubble" to pop?
I'd say possibly a -30% for GOOG, -25% for QQQ, -20% for SPY500, -10% for World? Or do you think it would be much higher?
I think that GOOG is the kind of stock which might get hit by the "AI bubble" popping, but has solid ground, and would recover most relatively quickly (also why I keep some cash at hand to be able to buy some stocks in case there's a downturn)
Another question:
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I'm also an European investor, and fear a bit the devaluation of USD, which would also eat on profits.
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I think for some reason in my broker, GOOG and SPY500 ETF are in USD currency, and QQQ and World are in EUR (perhaps because of the ETF I bought them with). Does that matter relative to USD/EUR valuation? Should I change my SPY500 ETF to a EUR-based one (if that exists?), or do the "EUR-based ETFs" actually simply do a conversion to EUR, and they are equivalent (eg in case of a downturn of USD-to-EUR, they will also go down by the same amount)
Final question: I've never really used/understood bonds? Are there the equivalent of ETFs for bonds? And what typical "benefits" (eg 4%/yr ? 6%/yr?) can I get from those? (so I can park my cash on these)