As Nvidia (NVDA) spearheads the tech sector rally, questions arise about potential market broadening. Jason Pride, Glenmede chief of investment strategy and research, joins Catalysts to discuss why investors should adopt a more "disciplined" approach to their portfolios amid current market conditions.

Pride suggests that a broader market expansion will "take a little bit of time." However, he emphasizes that the current environment necessitates two key investor behaviors: "be comfortable with not chasing the trade," and "actively rebalance portfolios." Pride argues this approach allows investors to trim exposures and manage investment risks effectively.

"A healthy rebalancing can simply be you establish targets for your investment parameters up front. You then look at those targets at a later point in time and look at what's off from those targets," Pride tells Yahoo Finance.

For more expert insight and the latest market action, click here to watch this full episode of Catalysts.

This post was written by Angel Smith.

Video Transcript

2000 outperformed the broader market at the end of last week as tech stocks continue to be under pressure.

Of course, led by NVIDIA.

Could this be the time for a catch of trade led by broadening out joining us to discuss?

And here on set, we've got Jason Pride, Chief of Investment Strategy and research at Glen me.

Thank you so much for joining us here.

Jason really appreciate it.

I know you just heard our conversation with Paul and I'm curious what stood out to you in terms of the concentration we're seeing in tech versus a strong desire to have a broadening out?

But are we seeing evidence of that broadening out really starting to happen now?

So I think it's probably going to take a little bit of time for us to actually see that broadening out quite often when we see innovation cycles.

What happens is we go through a period of hype uh through which valuations get stretched often to a point that's hard to discern at that point in time.

I heard you talking about how hard it is to value a hyper growth issue that that actually is a problem within investment analysis, everybody is grappling with today with things like NVIDIA.

But quite often following that hype, there is often a period of disappointment, meaning that we build up high expectations for some issues that eventually get to a point where they just cannot be met.

And that period disappointment shrinks the valuations.

And then maybe later in time, if you look back at the internet cycle, you know, we went through this and eventually there was a realization on the other side.

10 years later, all that hype actually ended up being true, end up being true 10 years later rather than within that exact time frame that everybody was hoping for.

So that may play out again this time.

So is it less that you're saying don't be bullish on the stock?

It's more that you're saying there might be a buying opportunity to get in when it's cheaper.

Exactly.

And I think that's where investment discipline comes in these sort of environments require investors to number one, be comfortable with not chasing the trade.

And number two, actively rebalancing portfolios because what's going to happen if you have a broad market exposure and you have something like NVIDIA or other tech stocks lifting ahead within the portfolio, that's actually going to provide you an opportunity to trim back that exposure and buy the things that have underperformed up until then rebalance the portfolio.

Let's not eliminate that exposure but reduce that exposure and manage the risk.

That's what this sort of market environment provides opportunity for what is a healthy rebalancing look like.

Then the healthy rebalancing can simply be you establish targets for your invest parameters up and up front.

You then look at those targets at a later point in time and look at what is off from those targets.

So if NVIDIA has run beyond your typical portfolio limits of exposure, bring that back to your portfolio of limits of exposure.

If equities have run beyond your target equity allocation, bring that back to your target equity allocation that allows you the opportunity to buy other things, buy other things within equities, buy other things within broad asset classes, like fixed income of all things.

I mean, fixed income today is offering 5% plus yields and opportunities for investors.

We haven't seen 15 years, right?

So there is an opportunity here for investors to rebound their portfolio back to a more disciplined portfolio allocation.

It's interesting, I know that your conversations are much more high level than this.

But when I talk to my mom about her 401k and she's getting advice about going international being in bonds.

I'm like, well, you're missing out on the NVIDIA rally, right?

Ho how do you tell people like me, don't think about it like that.

The the thing is I think that's a, that's actually a misconception.

You're, if you own that, you're not missing out on it, you're just managing the risk associated with it by buying into the small caps, by buying into Japan International other areas of the market, you're actually taking advantage of all the opportunities that exist around the spectrum and not just one opportunity and you're still not missing out on that one.

You just maybe minimizing your risk associated with it.