On paper it looks like I’ve discovered the perfect investment strategy. The value of my portfolio is up a stonking 20 per cent this year – and that’s on top of a 21 per cent return the year before.

I’ve earned around five times more than if I’d left the money in a top-paying savings account.

If I continue at this rate, I’ll have doubled my money within four years. I’d like to imagine it’s because I’m some kind of investment whizzkid. 

In reality, my returns are nothing special. You’ve probably enjoyed very healthy profits on your pension and other investment savings over the past couple of years as well – especially if you’re still some way off retirement age, as I am.

Normally with success like this I’d leave well alone and hope I’ve struck on a winning formula that continues to perform. 

But over the past few weeks I’ve had a rethink. I’ve sold some of my best-performing investments and added others to the mix that are all-but guaranteed to produce lower returns than those I’ve recently enjoyed. That’s for two main reasons.

What next? Fears of a potential stock market crash are getting louder

Firstly, I’m worried about what is on the horizon. There are always investment naysayers who are convinced that a stock market crash is just around the corner, but the chorus of those in agreement is getting louder and more mainstream.

Last week, the Bank of England and the International Monetary Fund chimed in to warn about the risk of an AI bubble in financial markets that would threaten to send shockwaves across the globe.

Officials on the Bank’s Financial Policy Committee drew comparisons with the mania for the dotcom stocks 25 years ago. And when the dotcom bubble burst, the value of the S&P 500 stock index in America fell by 49 per cent.

I don’t presume to know whether we’re in a stock market bubble and, if we are, when it will burst. Even the most experienced fund managers and economists are bad at this.

The global financial crisis is a case in point – very few saw it coming. Plus, for every investment expert who draws parallels between the current market conditions and those in the dotcom boom, there is another who is keen to point out the differences.

But I do know that sentiment is often what matters more than hard facts.

When investors are optimistic, they will pay ever-higher prices for investments that have not increased in fundamental value. But as soon as they get antsy, valuations can plummet even though very little has changed.

So the more that investors worry that we’re in bubble territory, the greater the likelihood that it could pop.

Secondly, the growth I’ve enjoyed means my portfolio is no longer doing what I’d intended. 

Until last week, I held a basket of thousands of shares in companies across the globe and in all sectors. 

My plan was to hold a bit of everything, to spread my risk, because if one sector or country suffered a fall, hopefully others would continue to grow and more than make up for it.

But this strategy has stopped working. That’s because the growth I’ve had has come overwhelmingly from just a handful of companies. All are based in the US, all are tech stocks and all are among those benefiting most from the rise in AI.

And the better these few companies perform, the larger the proportion of my portfolio they inevitably comprise.

Pricey: Gold is typically a favourite when there’s uncertainty ahead, but it has never been more expensive

Suddenly, chip-maker Nvidia alone made up 6.2 per cent of my portfolio, Microsoft 4.9 per cent and Apple 4.4 per cent.

If the value of these companies continues to rise, then I’m laughing. But it would take only a poor set of financial results from one, or a slight weakening in optimism over the outlook for AI, and my portfolio would take a serious dent.

Millions of investors will be in a similar position.

Just four companies accounted for 60 per cent of the gain in the value of the S&P 500 in the year to mid August – 26 per cent of that was Nvidia alone.

Deciding what to invest in instead is not easy. Gold is typically a favourite when there’s uncertainty ahead, but it has never been more expensive. 

Bonds usually work as a ballast to shares, but not always. And they come with their own issues if you’re worried about growing levels of government and corporate debt.

And, of course, the best strategy is not universal, and for any investor depends on your goals, age and how comfortable you are with risk.

You could argue that as I’m some way off retirement I needn’t worry, because I’ve got time to ride out the ups and downs. But I’m investing for my peace of mind in the present as well as my wealth in the future.

I may miss out on another bumper year of growth because I dialled down my holdings in AI tech stocks. But that’s a price I’m willing to pay to be able to sleep a little easier now – and not feel as much regret if stock markets take a tumble.

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