The dotcom bubble of the late 1990s tapped into the euphoria surrounding the then-new internet. Internet commerce was in its infancy, but the possibility of ordering goods online and having them delivered right to your door intrigued a great number of people. The sky seemed to be the limit when it came to tech companies, as everyone wanted to get in on what seemed like a can’t-miss growth opportunity.
As hindsight demonstrated, many of the companies that sought to take advantage of the internet’s possibilities didn’t have concrete business plans or real strategies for profitability. Their focus on growth at any cost resulted in numerous companies that spent more money than they took in. Eventually those losses piled up, investors got wise to the fact that they were throwing good money after bad, and numerous firms went out of business.
While Pets.com was one of the most egregious examples of the dotcom bubble, firms like Amazon weren’t immune either. While Amazon survived the dotcom bubble’s burst and shakeout, it still lost over 90% of its stock price during the bust. This time around during dotcom bubble 2.0, don’t be surprised to see stocks like Amazon, Facebook, Netflix, and Google losing significant amounts of value.
Market analysts are getting wise to the fact that tech stocks are in a bubble. Their prices are no longer in line with fundamentals, and ratios of price to earnings per share are now far higher for tech stocks than they are for the rest of the stocks in the S&P 500.
With so many investors today having invested in tech stocks, they remain overexposed to tech stocks in the event of a market crash. When dotcom 2.0 ends up bursting, they’ll find out the hard way that today’s tech stocks aren’t really any different than the ones that failed so miserably nearly 20 years ago.
With the rise in passive investing since the financial crisis, many investors may be heavily invested in tech stocks and not know it. With tech stocks being such high performers, many investment funds have bought heavily into them, especially technology- and growth-oriented funds. Many 401(k) investors may be heavily exposed to tech stocks through their plans and be completely unaware. They’ll receive a nasty wake-up call once dotcom 2.0 bursts.
Have you analyzed your investment holdings to see how exposed you are to tech stocks? Given how large a portion of the S&P 500’s gains have been made up of tech stock gains, there’s a good chance that if your 401(k) has performed well over the past 2-3 years you’re heavily invested in tech stocks. What will happen to your portfolio once dotcom 2.0 bursts?
Many investors today are turning to gold and silver to protect their retirement savings. Those nearing retirement in particular remember the dotcom bubble and the financial crisis, and how much value their portfolios lost. They’re determined not to see those kinds of losses again, which is why they’re investing in gold and silver to keep their assets safe and secure. If you’re worried about losing money during a stock market crash, you owe it to yourself to start thinking about investing in gold and silver today.