Many of you are worried about the high valuations of some US tech stocks such as Tesla. There’s not much point debating whether they really are overvalued, because even overvalued shares can continue rising just as undervalued ones can continue falling. Instead, we should ask how best to manage the risks here.
And they are big risks, because when overvalued shares fall they can fall a lot. When the tech bubble of the late 1990s deflated the Nasdaq composite index lost 75 per cent and did not return to its February 2000 peak until late 2014. The UK’s experience was even worse: the FTSE IT sector lost 95 per cent when the bubble burst and even today is only half its 2000 peak.
Join our community of smart investors
Subscribe today and enjoy unlimited access
- Comprehensive companies coverage
- Actionable commentary, ideas and portfolios
- Tools and data to help you manage and track investments
- Help managing your portfolio
