What Tech Veterans Wish They Knew About Investment Strategies


At WestStar we call our highflyer tech professional clients ‘Aviators,’ and we see our roles as co-pilots on their mission, making sure to help them navigate their way to their goals and to avoid crashing and burning along the way. Tech professionals face a wide range of unique challenges in their careers due to the constantly evolving nature of the technology industry.

Rapid Technological Advancements: Technology is advancing at an unprecedented pace, and Aviators must continually update their skills and knowledge to stay relevant. This can be challenging, as it requires continuous learning and adaptation to new tools, programming languages, frameworks, and best practices.

High Workload and Pressure: The demand on Aviators is often sky high, with tight deadlines and high-pressure work environments. Meeting project deadlines can be challenging and may lead to burnout if not managed properly.

Concentrated Stock Risk: Another challenge that tech professionals face is to make their hard-earned rewards work just as hard for them as they do to earn them. The fact that these rewards are made up of different forms of company stock adds a layer of complexity and risk to the management of their wealth. As the tech industry evolves, certain sectors may outperform or underperform.

Given how busy these Aviators are, it’s no surprise that the decision to sell or to keep their stock becomes overwhelming, and many people tend to bury their heads in the sand and avoid making decisions.

The way I see it is that Aviators spend their working lives accumulating wealth in the form of stock; and while this may allow them to meet their lifestyle and retirement goals, stock is no guarantee of these things.  It may get them into trouble and this is a risk that I help them to avoid.

Investors Confront Two Main Types of Risk When Investing

Undiversifiable – Also known as “systematic” or “market risk,” undiversifiable risk is associated with every company. Causes are things like inflation rates, exchange rates, interest rates, competition, political instability, market volatility and even war. This type of risk is not specific to a particular company or industry or individual, and it cannot be eliminated or reduced through diversification; it is just a risk that investors must accept.

Diversifiable – This risk is also known as “unsystematic risk,” and it is specific to a company, industry, market, economy or country; it can be reduced through diversification. The most common sources of unsystematic risk are business risk and financial risk.

Why Carefully Planned Asset Allocation and Rebalancing are Key Components of a Successful Investment Strategy

As the old saying goes, “don’t put all your eggs in one basket.” This idea that if the basket drops, so you wave goodbye to all your eggs is a useful picture of the risk that Aviators often expose themselves to by investing solely in tech stocks.

There is an emotional reason for this as well as an element of familiarity.

Sometimes I find that when clients first come to me they have staked the farm on one stock only – their company’s stock. This means that should the industry, sector, or company suddenly underperform, they could face losing their jobs and losing value in their company stock simultaneously. So how do I go about helping them to manage this risk?

"An investment in knowledge pays the best interest."

Benjamin Franklin

If you have a stack of ‘Benjamins’ under your bed, you’ll know whose face is on the $100 dollar bill. Google “Financial Quotes” and Benjamin Franklin’s old truism will come up top of the list, for good reason.  Only by learning about different investment strategies and markets, can investors make more informed decisions, minimize risk and maximize their returns. My job is to encourage them, teach them and guide them, and to ensure that they don’t gamble what they’ve worked so hard to achieve on an assumed future performance.

While a gambler’s time horizon is measured in hands or furlongs, an equity investor’s horizon is measured in years. Yes, investment involves risk, but smart investors focus on balancing risk. Inevitably that means selling stocks at some point.

I am sure many investors reviewing their portfolios today are asking whether it is time to hold or sell.

Maybe the right question is “How do I grow and protect my wealth in a way that meets my long-term vision for my life?”

In an ideal world, an ideal investment would be “high returns, low risk, guaranteed no loss, no fees.” I’ve been looking for something like this for a long time, and haven’t found one yet. So we have to work with how we get returns while managing our risk.

Reducing the Impact of Risk to Acceptable Levels

Risk management is not about removing the likelihood of a risk but about reducing its impact to an acceptable level. My aim is to encourage my clients to invest in various assets so that they will not all be affected the same way by market events.  All it takes is a stroke of the pen from congress, an executive order, a corporate scandal, or an anti-trust court case for the company to nosedive 15%.

Start with Diversification

Most investment professionals agree that, although it does not guarantee against loss, diversification is the most important strategy for reaching financial goals while minimizing risk.

Diversification is a common investing technique used to reduce your chances of experiencing large losses. By spreading your investments across different assets, you’re less likely to have your portfolio wiped out due to one negative event impacting that single holding or industry.

What Are The Most Effective Investment Diversification Strategies?

Familiarity bias encourages us to hold onto what we know. Instead of holding only one company’s stock, one can diversify periodically out of that company and into (let’s say) 30 stocks in the tech and IT sector. It lowers concentrated position risk, while still betting on the tech industry as a whole.

Diversify Beyond Tech Stocks: While it may be tempting for tech professionals to concentrate their investments in the tech sector, investing solely in tech stocks can expose your portfolio to concentrated risk. It’s important to diversify across different asset classes and industries – to spread the risk by allocating a portion of your investments to other sectors.

Diversification and Portfolio Balancing: Let’s say someone’s net worth is concentrated in one US large cap stock from their company. We can sell a chunk of it, and diversify into large cap, mid cap, small cap, international, emerging markets, energy, natural resources, real estate, domestic, and international bonds.

The exact allocation will depend on your risk tolerance, investment goals, and time horizon. A balanced portfolio can help mitigate the volatility associated with tech investments.

Index Funds and ETFs: We may consider investing in broad-based index funds or exchange-traded funds (ETFs) that track a diversified index, such as the S&P 500 or global stock market indices. These passively managed funds provide instant diversification across multiple stocks and can be a cost-effective way to gain exposure to various sectors.

Venture Capital and Private Equity: Tech professionals may have access to investment opportunities in venture capital or private equity funds due to their industry connections. While these investments can offer high potential returns, they also come with higher risk and illiquidity. Evaluate these opportunities carefully, considering your risk tolerance and the proportion of your overall portfolio allocated to such investments.

Real Estate: Consider diversifying your investment portfolio by including real estate assets. Real estate can provide stable income and potential long-term appreciation. You can invest directly in properties or through real estate investment trusts (REITs), real estate crowdfunding platforms, or real estate index funds.

Rebalancing and Reinvesting: Rebalancing involves selling assets that are overweight and reinvesting in underrepresented areas to maintain the desired asset allocation.

Regular Portfolio Review: Regularly review and rebalance your investment portfolio to maintain the desired diversification.

– How Much to Hold?
– How Much to Sell?
– How to Decide?

Read our handy article on Managing Concentrated Stock Risk. 

Diversification Reduces Risk and Enhances Long-Term Investment Outcomes

In the final analysis, diversification does not guarantee profits or protect against losses, but it can help reduce risk and enhance long-term investment outcomes. And because an investment in knowledge pays the best interest, it’s always a good idea to consult with a financial advisor who can provide personalized advice based on your specific circumstances and financial goals.

If you have questions about your specific circumstances, or want to make sure you’re equipped with the guidance and advice to pursue your future with real confidence and clarity, please get in touch. I welcome the opportunity to chat with you.

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I wish you every success in the future and hope to hear from you soon.

Kevin Chang

Kevin Chang
Financial Consultant

‘I help tech families and pre-retirees – those who are heavily compensated through employer stocks – make important decisions around their financial lives. I provide customized solutions and timely advice, using data and analytics to help them navigate the investment world in an efficient and tax-advantaged manner. My clients get to make the most informed decisions and so create the lives they want to live. They feel empowered, knowing they are making a lasting impact and creating generational wealth through their financial plan.’