Investors have had a good year, but many are worried that markets could be headed for a fall.
Delight that share prices have bounced back after their spring correction, when US President Donald Trump announced his sweeping tariff regime, has turned to concern over high-flying US tech stocks.
Excited investors have chased stocks linked to artificial intelligence and technology to high valuations, meaning they make up an increasingly large amount of the global stock market.
The leading US index, the S&P 500, was up 18 per cent this year, on 29 October 2025, but voices ranging from the Bank of England to fund managers polled by Bank of America have warned of the risk of an AI bubble.
An AI gold rush, as tech firms race to expand computing power and build huge data centres, has some investment commentators warning of echoes of the ‘dot-com boom’ that turned to bust at the turn of the millennium.
There are also worries over the concentration of the global stock market in a small number of very large US companies, all of which operate in the tech sector in some form.
Paul Niven, fund manager of F&C Investment Trust, says: ‘Even with a small number of exceptional companies in the US concentrating markets and dominating returns, it has not re-written the rules of finance. Diversification from a portfolio perspective is as important today as it has ever been.’
The conundrum for investors is that while they may be worried that tech stocks are priced for perfection and a slip-up could bring sharp falls, they also do not want to miss out on the potential gains that a rising stock market offers.
So, what can they do to protect themselves but still be open to profits? We take a look.
Nvidia has become the world’s largest company as investors flock to back AI
Understand what you are invested in
The simplest way to invest in the stock market is to hold a global tracker fund and investors have made good returns from doing so over recent years.
But as giant US tech firms have grown ever larger, the global stock market has become increasingly concentrated.
Most trackers must simply follow an index, such as the MSCI World Index, and must buy and hold the constituents in line with this.
The US market made up about 72 per cent of the MSCI World Index at the end of September. Meanwhile, the Magnificent Seven tech giants, Apple, Amazon, Alphabet, Meta, Microsoft, Nvidia, and Tesla, comprise about 35 per cent of the US S&P 500.
A 30 per cent share price gain this year has led AI chipmaker Nvidia to become the world’s largest company measured by stock market value, at $4.37 trillion.
Nvidia is considered one of the world’s best companies and its gains have been driven by its bumper profits. But it is now worth almost 50 per cent more than the entire FTSE 100, the UK stock market’s top tier, which has a market cap of £2.3 trillion or $3 trillion.
Even as the third largest country in the index, the UK stock market makes up just 3.57 per cent of the MSCI World, whereas Nvidia, Apple and Microsoft account for 5.65 per cent, 4.72 per cent and 4.54 per cent, respectively.
Nvidia represents a larger chunk of the MSCI World than Japan, the second largest country weighting in the index.
If your main investment is a global tracker fund tracking this index, you may have theoretically diversified, holding the shares of 1,320 companies around the world, but your returns are highly dependent on the fortunes of a relatively small number of mega-cap US tech firms exposed to similar risks.
If you opt for a global actively managed fund, such as F&C, the manager can make a decision on what investments it holds and can adjust them away from the market index, for example if they think one sector is growing too large or there are better opportunities elsewhere.
Whether you hold a tracker fund or ETF, an actively managed fund or investment trust, or individual shares, it pays to exactly where you are invested. Your fund’s factsheet will tell you this and should show top company holdings and asset allocation across different countries and sectors.
> Watch: Learn more about F&C Investment Trust at FandC.com
Paul Niven, manager of F&C Investment Trust
Actively diversify
Diversification is a key element of successful long-term investing and at its simplest level means not putting all your eggs in one basket.
By spreading your risk across countries, sectors and companies, you increase your chances of backing some that do well and decrease your risks of losses from those that do badly.
If you want to benefit from rising stock markets but are concerned about certain risks, you can try to actively diversify away from them. You do not need to ditch holdings altogether but by dialling down their proportion in your portfolio, you are tilting yourself away from the risks.
This may cost you some gains in a rapidly rising market but could save you from big losses if hot stocks take a tumble.
Niven says: ‘Historically, only a small portion of all listed stocks end up driving the majority of total returns in equity markets. F&C’s diversified approach is more likely to capture these small number of future winners – the proverbial needles in the haystack.
‘By combining investments in across managers adopting different investment styles, such as ‘growth’, ‘quality’, and ‘value’, we diversify the portfolio across rewarded risks, whilst seeking to identify future winners that can generate strong returns.’
As an active investor, Niven has the option to reduce that exposure if he chooses to and this is illustrated by F&C’s geographical spread. North America equity comprises 58.4 per cent of the trust’s asset allocation, while both Europe and Emerging Markets account for 10.1 per cent each, the UK is 4.4 per cent and Japan 4.1 per cent.
F&C also invests in private equity, tapping into the potential of companies that aren’t listed on the stock market.
This shows how you can still back profitable stock market success stories, such as US tech giants, but adjust a portfolio to also target other parts of the market.
Look for value and quality
Backing firms that can be bought at a reasonable price and that have shown a track record of robust and resilient profits, offers a degree of protection whatever the stock market weather – and the opportunity to profit from their consistent earnings.
For example, F&C says that it adopts a straightforward investment strategy and looks for companies that offer value, growth and quality.
Niven says: ‘We invest on the world’s major stock markets in the shares of established companies, strong newcomers and rising stars in developing markets. It’s a diverse portfolio strategy that also gives investors exposure to a range of well-managed private equity opportunities.’
F&C’s investment first looks at strategic asset allocation, considering where it wants to invest over the long-term, secondly, it considers the tactical investment environment by seeking to take advantage of shorter-term opportunities and avoiding risks to its investments, finally, it looks to add value from stock selection.
Investors should also consider the long-term benefits of compounded dividends. Reinvested dividends have been proven to be a major driver of stock market returns over time. Meanwhile, a resilient and consistently rising dividend can be seen as a hallmark of quality for a company.
As one of the investment trusts dubbed a ‘dividend hero’ by the AIC, F&C has a 54 54-year history of raising its dividend payout.
Niven says: ‘The principle of diversifying exposure across a range of investments for F&C has enabled F&C to pay a dividend to shareholders in every single year since 1868 and a rise in annual dividends in each of the past 54 years.’
> Learn more about F&C Investment Trust
Capital at risk. All data sourced as at 29/10/25 by This is Money, from NYSE, MSCI, AIC. Mention of a specific stock is not a recommendation to deal. There is no guarantee that dividends will continue to increase. Issued by Columbia Threadneedle Management Limited, No. 517895, registered in England and Wales and authorised and regulated in the UK by the Financial Conduct Authority. Approved as of October 2025.