Ian Cowie: my forever fund went up despite tech wobble

Did a DeepSeeking missile hit your investment portfolio on Monday? Now here’s a more positive surprise, there were winners as well as more highly publicised losers among investment trusts and other technology shares this week.

My modest forever fund actually went up in value, as if to demonstrate how diversification can pay off just when we were beginning to think we didn’t need it anymore. No wonder City cynics say that insurance is a complete waste of money - until it becomes the best thing you ever bought.

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China’s latest challenge to the stock market cult of “American exceptionalism”, is an apparently free artificial intelligence (AI) app, called DeepSeek. Never mind, for now, allegations about whether they built it by stealing intellectual property (IP) from the likes of Microsoft Corp (NASDAQ:MSFT) and its $10 billion bet on generative pre-trained transformers (GPTs) via the unlisted OpenAI and its ChatGPT app that charges $20 per month.

Here and now, DeepSeek’s digital-price war provocation should serve as a wake-up call for any investors who are complacent about a handful of US stocks, “The Magnificent Seven”, delivering more than half the gains from the S&P 500 index last year. Some of these digital giants might deliver more than half of all losses this year.

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For example, shares in the chip-maker that has gained most from AI demand, NVIDIA Corp (NASDAQ:NVDA), fell by -17% on Monday, wiping $600 billion off its value. In cash terms, that was the biggest one-day share price fall ever, before Nvidia staged a partial recovery on continued demand for its graphics processing units (GPUs) later this week.

More positively, the self-descriptive Polar Capital Technology Ord (LSE:PCT), a globally diversified £4.7 billion investment trust in which I have been a shareholder for more than a decade, managed to minimise its DeepSeek Monday loss to -6.8%. That’s an unwelcome way to start the week but not too big a deal for anyone who has invested through several decades of stock market volatility.

The explanation is that PCT has 11% of its underlying assets invested in Nvidia, its biggest holding, but also 6.9% in Microsoft, which only fell by -2% on Monday, plus 4.9% invested in the iPhone-maker Apple Inc (NASDAQ:AAPL). Shares in the latter actually went up by 3.6% on Monday, followed by another 3.2% gain on Tuesday, on hopes that cheaper AI will help this hardware-maker improve its computers and phones.

Because Apple was my most valuable holding for many years -  before I took profits in 2024, making it my second-biggest stake -  that helped my “forever fund” of 50 shares, including investment trusts, rise by nearly 2% this week. More importantly for this long-term investor, PCT has delivered total returns of 32% over the past year; 121% over five years and 525% over the decade, according to independent statisticians Morningstar on Wednesday.

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Despite that eye-stretching performance, PCT shares continue to be priced -8.3% below their net asset value (NAV). Better still, the stock-picking skills of Ben Rogoff, PCT’s manager since 2006, seem reasonably priced with this fund’s ongoing charge of 0.8%. Less happily, there are no dividends despite the fact Apple yields 0.4% and Microsoft pays 0.7%.

While PCT remains the leader in the Association of Investment Companies (AIC) “Technology & Technology Innovation” sector over the past year, it is only fair to add that it was beaten into second place over the medium and long term. Allianz Technology Trust Ord (LSE:ATT), the £1.8 billion investment trust managed by Michael Seidenberg and Danny Su jointly since 2016, is the medium to long-term leader with total returns over the usual three periods of 31%, 140% and 652%.

The top holding in ATT is Nvidia, at just over 10% of underlying assets, followed by Apple at 9% and Microsoft with 7.7%. That diversified portfolio limited ATT’s loss on DeepSeek Monday to -5.2%, also followed by partial recovery on Tuesday and Wednesday. Better still, ATT is even cheaper to buy and own than PCT because the former fund trades at a -9.6% discount to NAV with ongoing charges of 0.7%. Once again, sad to say, there are no dividends.

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Full disclosure: all the above was written before the Federal Reserve’s latest musings on interest rates or Microsoft’s second-quarter results, both of which will affect market sentiment and share prices.

But the biggest lesson from DeepSeek Monday is that diversification remains the simplest and surest way to diminish the risk of catastrophic loss, whatever happens next or hits stock market sentiment.

Ian Cowie is a freelance contributor and not a direct employee of interactive investor.

Ian Cowie is a shareholder in Apple (AAPL), Microsoft (MSFT) and Polar Capital Technology (PCT) as part of a globally diversified portfolio of investment trusts and other shares.