The tech sector, which makes up more than a third of the S&P 500, is still profitable, even if companies are burning cash on AI. – MarketWatch photo illustration/Getty Images, iStockphoto
The markets are on a roll. It’s exciting and, yes, nerve-racking.
One septuagenarian Moneyist reader is feeling rattled: “I have quite a bit of money in a mutual fund, which has done well due to the amount of tech stocks and others that have appreciated quite a lot,” he wrote. “This fund is not in a retirement account. I fear a significant decline in the S&P 500.”
“I have a considerable amount of unrealized capital gains in this fund and can’t decide whether selling some or all of it and paying the taxes makes sense, or if I should wait through the coming decline. I am 78 and retired. My wife and I have an income of $200,000 due to IRA withdrawals.”
A word of caution for him and everyone else: If you have $100,000 or $1 million in your tech-heavy mutual fund, you are sitting pretty. It will receive a step-up in basis as an inheritance. With IRA withdrawals and Social Security, this man is enjoying some well-earned gravy.
Investors should not make decisions about their portfolio based on a feared downturn in the S&P 500 SPX. You will see arguments for and against whether there is a big correction ahead. Instead, adjust your risk profile for your age and tolerance, and plan your legacy.
All that tech money won’t do you much good sitting in your bank account. Focusing on an event that may or may not happen will distort your perspective and merely create fear. That’s never a good emotion on which to buy or sell stocks, or any other asset class.
This reader is not the only one concerned about how the artificial-intelligence gold rush has caused the market to reach record highs. The tech sector, which makes up over a third of the S&P 500, is still profitable, even if many companies are burning large amounts of cash on AI.
Most of the “Magnificent Seven” companies of Alphabet, Amazon, Apple, Meta, Microsoft, Nvidia NVDA…
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