Investing is an important step toward building a strong financial future. It isn’t enough simply to save up cash or even to deposit it into a routine passbook savings account. You need to put your money into some instruments that will provide a better rate of return so that you can make the most of your investment dollar.
That’s easier said than done. Wading through the countless stocks, bonds, and mutual funds that are available to you is an overwhelming process. Some are good, some are fair, and some are bad. You want to make sure you choose well.
So where does that start? It begins with research, and it’s a good idea to start in a sector that’s strong overall. Technology has been a proven performer for several years now, and thanks to the growing number of sub-sectors within tech, it is building a broader base of opportunities.
Specifically, tech stocks used to live and die on the success of computer manufacturers. If things went well there, all the other related industries did well also. But so much of tech now requires no computer use, at least by the end consumer. Services like data networks and Optimum TV are predicated on the use of phones and televisions, so they are largely insulated from whatever may happen with the price of tablets, laptops, and desktops (remember those?).
Even the computer companies have diversified their offerings enough to the point that computers are just a portion of what they do. Apple built itself on computers but has now become the leader in mobile phones, with their computers adding to their overall staying power rather than creating it.
So what really does make a bad tech investment? After all, plenty of investors have lost large sums of money in bad technology stocks. What can you do to avoid the same outcome?
We have already addressed a lot of it. You want to look at tech stocks that are based on a broad range of product offerings which don’t depend on a single sector of other tech companies for their own forward progress.
In addition, history matters. An established stock with real, neutrally-sourced data is a far better option for examination than one that is built on its own hype and astronomical expectations.
This sounds simple and logical, but it is often overlooked. Too many people get caught up in the fever about an initial public offering and think they want to get in on the ground floor. While it’s true that some of these brand-new stocks do create a fortune, it is also important to understand that the company itself isn’t nearly as new as its presence on the exchange. Many companies are privately held for years before making an IPO, so lean toward these known quantities.
Companies that are still heavily speculative when they go public may simply be looking for an infusion of capital to try to right a sinking ship, and they will take your money with them when they fail. New companies have no track record of withstanding various economic factors like interest rate changes or inflation, so you just don’t know if they are built to last.
Other times a stock may be an established player on the market but it’s gathering interest about a new product. While the company has a good history, the new offering is a big unknown. Should you invest?
It depends once again on the company’s track record. Certainly, the newest iPhone can spur legitimate interest in Apple, but even if a particular model is a failure, the company is strong enough to bounce back and regenerate interest for the next model.
More than anything, an investment should match your time horizon. If you are decades away from retirement, you can take some chances because there is time to recover. In later years, you want to keep it more conservative.
Tech can be a great place to invest. Just follow a common-sense approach to the choices you make.