Vanguard on the 3 best investments – and tech stocks aren’t one of them

The asset manager published a preview of its future economic and market outlook.

The asset manager previewed the upcoming economic and market outlook. electric potential We presented a long-term outlook for the market environment heading into 2026.

In the capital market overview, Vanguard experts outlined three investment types with the strongest risk-return profiles over the next five to 10 years.. And despite the powerful megatrend called AI – Technology stocks are not on the list.

According to Vanguard, technology could maintain momentum in 2026 due to the pace of investment and expected revenue growth, but there are long-term risks.

Risks are increasing amid this exuberance, even if some indicators appear “rational.” Even for investors who are most optimistic about AI’s prospects, more attractive investment opportunities are emerging elsewhere. Our confidence in this view is growing, and it is similar to the return on investment in previous technology cycles,” Joe Davis, global chief economist at Vanguard, said in a preview.

Instead, Vanguard says the best investments for the next 5 to 10 years are:

• High quality US bonds.
• US value-oriented stocks.
• Stocks in developed markets outside the U.S..

According to Vanguard, high-quality bonds should provide solid real returns that comfortably exceed expected future inflation rates and provide diversification. The remaining two (value stocks and international stocks) should be fueled by AI.

Expanding the scope of AI

While tech stocks remain at that level

Vanguard lowered its expectations for U.S. growth and technology stocks.This has been the dominant force for the last 10-15 years. But at the same time, Vanguard is optimistic about the transformative prospects of AI..

High expectations for US tech stocks are unlikely to be met for at least two reasons. The first is the already high profit expectations, and the second is the typical underestimation of the creative destruction of new entrants to the sector, which undermines total profitability. Volatility in this sector, and therefore the U.S. stock market as a whole, is very likely to increase,” Davis wrote in a preview.

Vanguard expects average returns of 4-5%. For US stocks over the next 5-10 years. These quiet forecasts are driven almost entirely by risk-return assessments for big tech companies. However, other areas, particularly value and international stocks, are likely to suffer due to the continued adoption of AI.

“Both U.S. value-oriented and non-U.S. developed market stocks will benefit the most over time as AI’s ultimate growth boost extends to consumers of AI technologies.” Davis wrote. “Economic changes are often accompanied by changes in stock markets throughout the entire technology cycle.”

Davis concludes: These three investment opportunities – High quality bonds, value stocks and international stocks are Both ‘offensive and defensive’. This means you can benefit from all scenarios, including AI booms, slowing growth, and recessionary environments.

“This risk assessment applies regardless of whether today’s abundance of AI is ultimately reasonable,” Davis wrote.

Vanguard’s full economic and market outlook is expected to be released in mid-December.