The technology industry has been one of the biggest successes in the stock market of the past couple of decades. And, this makes it an attractive proposition for investors from all kinds of backgrounds.
If you are feeling the pull of the tech industry and have some money put aside, there’s a good chance you might want to invest. However, as with all investments, there are a few risks involved. Read on to find out more in our beginner’s guide to investing in the tech industry.
Beware the Dot-com Crash
History can tell you a lot about investing in the right areas. And, for the technology industry, the dot-com boom – and bust – has some helpful pointers. When the dot-com bubble burst, a lot of people lost an astonishing amount of money – and it could happen to the technology sector just as easily. Sure, the fallout may not be quite as dramatic, but there is a chance that the crazy valuations of certain companies will cause problems.
Mix up your Investments
Having a diverse portfolio is vital to any successful investment strategy. So, while the technology sector is attractive to many, make sure it isn’t your only option. You have to mix things up a little if you want to minimize all that risk. And, of course, there are even sub-categories of the tech industry that you can use to your advantage. For example, investing in services such as Facebook is OK, but you should also look into real world product makers such as Apple.
Understand the Markets
You will need to keep up to speed with the market to ensure you keep your investment as safe as possible. Let’s use Apple again as an example. While they are currently a great option and regarded as a safe choice, you just don’t know what will happen around the corner. So, keep yourself up to date on the Apple stock forecast, mix up your investments, and look into other areas like property and bonds. Do this, and you should stay safe from any industry-wide crash.
Understand the Industry
Knowing about an individual product is not enough to be an expert in investing in the parent company. There are many other factors that contribute to any product. For example, sales of a PC could be skyrocketing, and you might fancy your chances with the manufacturer. But, you also need to consider the parts that make up each of those devices. It might use a particular type of plastic; that is only available in a particular part of the world. What happens if the company that produces that plastic goes bust? The PC manufacturer might have to look at using an inferior product, and sales could drop – as will their stock price. So, it’s not enough to know about the company you invest in. You also have to know about their suppliers, where they are based, and the problems they might encounter.
Follow the Leaders
Finally, if you think technology is a good idea for investment, you might want to think again. Many successful investors stay well away from the technology industry – Warren Buffet included. Yes, it’s a leading field to get involved with, and it has a fresh edge to it that appeals. But, sometimes, you might be much better off in buying shares in a small orange juice company than you will be with a software giant.