I recently had a guest post published over on Million Dollar Journey (Thanks FG) which gives investors ideas for how to invest in and profit from the Smart Phone revolution. While Smart Phone and tablet related companies are plentiful, what about investing in technology in general?
Investing is a constant balancing act that weighs risk vs reward and the tech sector is one of the best examples of this. When markets are hot, tech stocks outperform the market and returns can be very high. This also works in reverse, when times are tough tech takes a beating as money flows into more stable, established companies. Remember the Internet Bubble of 1999-2000? Everyone loved technology companies and they could do no wrong then BOOM everything collapsed.
Given the level of risk in this sector, here are some tips for you to consider before buying a shiny new name in tech.
- Invest in companies whose product or service you understand
- Do not let technology companies make up more than 20% of your equity portfolio
- Monitor your tech stocks more closely than other sectors if you are a hands off investor
- Unless you are buying a major name in tech like IBM, Microsoft, Google or Apple consider selling to lock in profits after 6 months to 2 years.
Remember, tides can turn quickly in the tech sector. In another post, I’ll highlight the tech winners and loosers that I’ve owned over the last few years.
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