Stockspot warns AI ETFs pose risk to portfolios
Stockspot’s latest report shows ETF investors are finding returns in global shares and income, while warning that chasing hot themes like AI can expose portfolios and hurt diversification.
AI and Tech ETFs See Strong Gains
The report analyzed ETF performance through September 30. Investors showed increased interest in AI and technology. The Global X Semiconductor ETF (SEMI) returned 108.4% in a year. Betashares Asia Technology Tigers ETF (ASIA) gained 55.5%.
Stockspot warned the AI thematic might be overheating. It is not considered a core holding. The report noted, “Chip shares had an extraordinary year as companies spent heavily on AI computing. The risk is that share prices can run ahead of the profits those investments eventually produce.”
US and Global Shares Lead Client Investments
US and global shares remain top choices for clients. Two US ETFs hold the top spot. Global bonds rank third, and Asian technology is fourth. Australian dividend shares are sixth.
The iShares Core S&P 500 ETF (IVV) returned 10.2%. Stockspot warned against focusing on just a few market segments. It recommends diversified foundations combining Australian and global shares, emerging markets, bonds, and gold.
Simply owning several ETFs does not mean a portfolio is well-diversified. Stockspot advises diversifying across countries, industries, and currencies to reduce reliance on any single market or trend. For instance, the VanEck Gold Miners ETF (GDX) returned 13.2%, compared with just 1.7% for Global X Physical Gold (GOLD).
Income ETFs Appeal to Investors
Dividend shares outperformed the broader market. The report highlighted the appeal of income ETFs, with the Vanguard Australian Shares High Yield ETF (VHY) returning 13.9%, compared to 3.2% for the Vanguard Australian Shares ETF (VAS).
“Australian investors want income,” the report stated, noting dividends as a major investment theme. The firm warned that while upcoming capital gains tax changes might shift focus toward income, this could reduce funds available for company growth. “If tax settings encourage companies to pay out more of their profits, that could leave less money for reinvestment, expansion, and hiring. A portfolio still needs room for future growth.”
