I am sitting down with an advisor and a client this afternoon to discuss a portfolio. Usual enough. But in this case, the portfolio looks a bit different. It has a large number of individual stocks, most of which are in the tech space. Of course, it has done very well over the past year or more.

The client wants to “own the future”—to own the growth companies of the next generation. This is a laudable goal, and it’s one that I share. But looking at the portfolio, that is not what the client has.

Not a Bad Portfolio, But . . .

What he does have is a very comprehensive collection of the winners over the past couple of years. As noted, he has done very well, but those companies are the ones that have done well in the past. If you look at the FANMAG companies (Facebook, Amazon, Netflix, Microsoft, Apple, and Google), they could change the world going forward—and likely will—but how much larger can they get? If you have a $1 trillion market capitalization in a $15 trillion economy, can you grow to 10 or 100 times your present size? Not using the math I was taught.

When looking at his holdings and performance, you see the same thing. Yes, he has done very well, as those companies have done very well. When you compare his performance with the market index, however, he is doing about as well as the index—and not actually outperforming at all. That makes sense, because the companies he owns compose a large share of the index. It’s hard to outperform the index when you largely own it.

This is not to say it is a bad portfolio. It is to say that what he does own is not what he says he wants to own.

So, What to Do?

First, the client should understand where he really is. He has been very happy there and done well. Does he really want to change the portfolio into something else? Second, he must understand the risks of where he is. He thinks of his companies as growth stocks, and so does everyone else. What happens when the limits to growth start to appear?

Beyond the risks of the current portfolio, we also have to understand the difficulty of what he says he wants to do. The real question here is time frame based. He wants a portfolio that takes advantage of the next 20 years. What he has is one that is based on the performance of the past 5 years.

Time to Make the Switch?

Making the switch is neither simple nor easy. It is easy to buy the big names in the news, the companies that rule the internet and have made investors rich. It is much harder to identify and then buy the small companies that will be able to grow to 100 or 1,000 times their present size. Those companies will be smaller, riskier, and significantly more volatile than the giants. Holding them will require a great deal of faith, which may be misplaced.

Ask the Hard Questions

It should be an interesting discussion. I have been working on my own portfolio as well, with similar challenges, so I understand and respect the problem. Many other investors who have done well in tech are facing similar questions. They are good questions, and it should be a good discussion—but it will not be an easy one.

Editor’s Note: The  original version of this article appeared on the Independent Market Observer.