AI boosts favorite funds – expert's advice: Spread the risk

Global funds, long a favorite among Swedish savers, are becoming increasingly concentrated in IT and technology giants, raising concerns about the risks within household investments. Maria Landeborn, chief economist and senior strategist at Danske Bank, advises investors to diversify their portfolios by adding funds exposed to Sweden and Europe.

These regional funds offer exposure to sectors like banking and classic industry, providing a counterbalance to the heavy IT and technology focus prevalent in global funds. According to Nordnet, the five largest tech companies, Nvidia, Apple, Alphabet, Microsoft, and Amazon, now constitute nearly 20 percent of a typical global fund's value. Nine of the world's ten highest-valued public companies are also classified as tech companies.

Recent AI-driven market volatility has served as a reminder that stock market rallies are not perpetual. While Landeborn sees no cause for panic, she urges small investors to spread their risks. "In Sweden and Europe, we have much more banking and classic industry than in a global fund," she explained. "If you are worried about AI exposure, this is a good complement. Then you get exposure to completely different types of companies and sectors."

Adding some emerging market funds is also a sound strategy, according to Landeborn, though she notes that these, too, are increasingly influenced by AI and IT. When choosing between actively managed funds and index funds, Landeborn recommends using index funds for the core of a portfolio. "Among the world's largest companies, it is difficult for an active manager to know more than anyone else," she said. "Within small-cap companies, it can be good to have an actively managed fund with room for more independent analysis."

While many savers shifted away from the US towards Europe last year, several American and Asian AI companies experienced extremely strong performance, with some stock prices surging hundreds of percent in a short period. Landeborn stopped short of calling it a general AI bubble but acknowledged that "the price development in some AI stocks has gone too fast."