Throughout my career in the investment industry and throughout my lifetime on this Earth, the top-performing sector in the US stock market has always been the technology sector. It is my professional opinion that this sector will continue to outperform for the foreseeable future. There is plenty of noise currently around divesting from tech stocks. We’ve been here before, and we’ll be here again. While the Mainsail Equity Portfolio Model does diversify across multiple sectors (healthcare, finance, and communications), it remains heavily concentrated in the tech sector. The tech stocks it currently holds have done the heavy lifting and take the majority of the credit for boosting our YTD return to 36.02%.

You may have read our recent white paper, which made it sound like we are anti-diversification altogether, and this can get confusing. The point of that paper was to help investors recalibrate their definition of diversification. We absolutely champion diversification. We believe investing in multiple stocks across multiple sectors is prudent, and our Mainsail Equity Portfolio Model’s 15 holdings stay in line with that view. What we don’t do is put any confidence in allocating indiscriminately across 500 stocks in an index fund with zero discernment. And we aim to recenter investors’ views on what qualifies as a well-diversified stock portfolio, as too many have adopted the view that owning 500 positions is a wise strategy.

Index investing is a better strategy than placing uncalculated speculative bets on popular stocks without expertise in in-depth fundamental analysis. Just guessing and hoping that a company will perform well because it sells smartphones or electric cars is not a strategy, and that could go very badly for investors who can’t gauge overvaluation. In that sense, index investing is the safer strategy to prevent catastrophic loss. But there’s a big difference between a strategy that is time-tested, proven, and fervently endorsed by legendary stock investors and academics, vs a strategy that is simply not the worst thing you could do.

There is some truth to the recent warnings about a valuation bubble in the tech sector. There are some stocks that are dangerously overvalued and could reach a tipping point toward price corrections. Many of those are in the S&P 500 index. Vanguard, the undisputed champion of index funds, has just come out with its own warning that the broad market index will see far weaker returns in the coming years due to these heavily overvalued stocks that have already priced in their growth potential and have little room to go anywhere, other than possibly down.* None of the aforementioned overvalued stocks are in our carefully curated portfolio models. While we can’t guarantee against market volatility or potential loss, we can guarantee against the risk of indiscriminate speculative betting or diluted returns from spreading capital too thinly across 500 holdings.

For comparison, the elevated price valuations we saw leading up to the 90s tech bubble averaged price-to-earnings ratios over 100x among some of the top tech stocks of that time. Today’s elevated valuations in the tech sector are currently only reaching a 3rd of those numbers on average. Those valuations are still high, but would need to climb three times higher to be in the ranks with what caused the 90s tech bubble. Furthermore, many of today’s dominant tech companies (e.g., Apple, Amazon, Google, Microsoft, Nvidia)** are mature, highly profitable, and cash-flow-generating machines. In contrast, many companies during the dot-com era were new start-ups with little to no revenue or clear business models, existing solely on venture capital and speculative investment.

While caution is warranted and we do see reasons to divest from overvalued stocks (in any sector), we don’t see a reason to broadly divest from the tech sector as a whole, and we have no plans to. We anticipate that our carefully researched tech holdings will continue to do the heavy lifting in our portfolio returns in the coming years. Do we anticipate more volatility? Always. We always anticipate stock market volatility. While we’re happy to report a healthy year-end return, it was a rough ride to get here, particularly in the first half of the year. Here’s a visual recap of the market’s performance in 2025.

We expect plenty more of that, and that is why I won’t fight you if you still prefer to diversify more broadly than what I recommend for growth investors. My job is to help you find a strategy that is both smart and one you can sit comfortably with. Focused growth isn’t for everyone, and I can help you learn more about it as we build upon your investment expertise, but only invest your hard-earned money where you’re comfortable and confident. I want you to do well, but I also want you to sleep at night.

Live long and live well,

Alyse

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*Vanguard Releases 2026 Economic and Market Outlook. December 10, 2025. https://corporate.vanguard.com/content/corporatesite/us/en/corp/who-we-are/pressroom/press-release-vanguard-releases-2026-economic-and-market-outlook-121025.html

**These are merely examples and not to be taken as trade recommendations. A mature, highly profitable company can still become dangerously overvalued.