Dividends and Richly valued tech stocks leave some investors looking for an off-ramp

The best performing stocks in 2019 was the technology focused and includes names such as Microsoft, Amazon, Facebook, Visa and Mastercard. If you are investing, it is hard not to own some or all of them. According to Saqib Iqbal Ahmed of Reuters just 4 stocks – Apple, Microsoft, Facebook and Amazon generated more than 20% of the S&P 500’s total return according to data from S&P Dow Jones Indices.

The dilemma is the stocks have done well, if you own Index funds you own the companies. Most mutual funds have one or more in their holdings. They are hard not to own, what do you do, besides hope the stocks continue to go up. There are plenty of reasons why they could and there are plenty of concerns they may not. The S&P 500 information technology sector trades at a 12 month forward price earnings ratio of 21.53 versus the rest of the S&P 500 of 18.26.

Kevin Dennean technology analyst at UBS Global Wealth Management gradually reduced exposure to the technology sector but it has gone against us. Valuations only became richer.

Linking to dividend paying stocks, some of the technology stocks pay dividends and if you buy them for their dividends and long term capital gains, then it does not matter as much, if the shares did not continue to rise at 20% a year. The writer owns a couple of the list and some of them have doubled and more which is great. At the moment selling is not on the table, but dividends are and long term growth are on the table. The stocks will rise and fall as they may however if they continue to rise it would be welcomed.

There are more questions than answers, till the next time – to raising questions.

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