The rising trend in the stock market, particularly focused on stocks related to semiconductors and AI (artificial intelligence), has led to both excitement and concern, a situation that is not unique to “Korean ants” (individual investors). “U.S. ants” are also frequently encountering anxiety after participating in rush buying driven by FOMO (fear of missing out) and then dealing with significant drops in stock prices.
U.S. individual investors discuss their investment experiences, tactics, and approaches to managing risk on online forums such as Reddit. They expect that when the upward movement ends—similar to what occurred during the U.S.-Iran conflict—it will not decrease slowly but rather drop abruptly. They are especially worried that AI-focused ETFs, which have risen significantly lately, could quickly adjust portfolios amid market fluctuations. What strategies for spreading risk are U.S. investors employing?
① Asset Rebalancing
The primary risk-spreading approach utilized by U.S. ants, similar to their Korean counterparts, includes regularly adjusting the portfolio. For instance, if shares in semiconductors and AI surpass 50% of the overall investment, they sell some and purchase different stocks.
Key sectors for rebalancing U.S. investments are electricity, gas, insurance, and healthcare stocks. These firms generate robust cash flows, providing reliable dividend returns. Consistent dividends can serve as a safeguard against potential significant declines in semiconductor or AI stocks.
② Stocks that Resist Inflation Under Scrutiny
Following the start of the U.S.-Iran conflict, stocks in the food, distribution, and financial industries became favored as means to diversify risk. Increased oil prices after the war led to worries about inflation.
As inflation causes consumers to cut back on spending, essential items remain indispensable. Therefore, food and distribution companies can increase prices to cover rising costs, maintaining consistent profits. Moreover, with inflation continuing, the U.S. Federal Reserve is anticipated to increase interest rates, making banking stocks—gaining from higher interest rate spreads—more appealing.
③ ETF Rotation
This approach focuses on selling exchange-traded funds that have significant exposure to semiconductors or artificial intelligence stocks, and replacing them with funds that have reduced exposure. Rather than selecting ETFs that are heavily focused on major information technology companies, they opt for ETFs that provide a more balanced mix of small-cap and non-technology stocks.
④ Concentrate on Mega-Tech Shares
They focus their semiconductor and AI investments on 3–4 large-cap stocks. Even if these industries experience a downturn, leading companies are anticipated to remain resilient.
Certain investors concentrate on highly secure stocks, while directing the rest of their money into alternatives such as gold, silver, or bonds. This strategy prepares for capital moving towards other markets when there are fluctuations in the stock market.
⑤ Stop-Loss Orders
U.S. ants also employ risk-diversification strategies by placing stop-loss orders in each trade. They regularly make use of stop-loss functions available on brokerage platforms.
A stop-loss order triggers the sale of stocks when prices drop below a specified percentage or value from their highest point. For instance, an investor might establish a rule to sell a stock if it declines 10% from its peak following an increase. This automatic action assists investors in securing profits or minimizing losses during significant market fluctuations.
⑥ Quantitative Programs
Individuals with a background in coding apply quantitative methods. A typical technique involves analyzing variations in sector indices alongside the performance of specific stocks, purchasing those that are undervalued and selling those that are overpriced.
In periods of market stability, U.S. investors applied quantitative techniques to enhance profits. Nevertheless, following a stock decline triggered by the U.S.-Iran conflict, they introduced variables linked to rising oil prices into their systems to avoid portfolio losses. As the conflict has now reached a truce, they are progressively integrating factors associated with semiconductor and AI exposure to get ready for market changes.
jasdooit 
Leave a comment