Ever wished you’d got in on the ground floor with the likes of Google, Apple, Microsoft or Meta?
The US technology sector – worth $1.6 trillion – has, without doubt, been one of the areas of phenomenal growth over recent years; driving innovation and changing our world.
Yet, with every success story there are many others who fall by the wayside. Look back to the ‘dot com boom’ era of the late 20th and early 21st centuries. Plenty of money was invested only to evaporate when the bubble burst soon after.
While the markets have long since re-adjusted, the perils of investing heavily into the next bright thing can deliver disappointment more often than returns.
All of which makes choosing the right stocks in which to invest no easy task.
Particularly given the speed at which consumer trends and demands change. Just a little over 20 years ago, Apple looked to be on its knees; dominated by Microsoft.
When cell phones first emerged it was the likes of Nokia and Motorola who led the market and seemed all conquering.
Worth also considering is that the range of tech investments can be so varied – from building on existing technologies to so-called ‘moonshot’ ventures; pioneering explorations of future breakthroughs which could make a huge impact…or fail to deliver.
They may also require patience, as an investor, as they seek to deliver on their promise.
In addition, tech now covers almost all sectors; so be clear as to what competition a company which catches your eye may face.
All of which makes the challenge for an investor looking at short and long-term gains even harder to predict.
Tech stocks can carry a higher premium than other sectors because of the historic growth potential. Which means more risk.
For investors, it is also worth being cautious of buying into the hype of the new kid on the block; a tech company whose projected growth seems unstoppable. All too often they can then be left counting the cost soon after when the company’s growth has leveled out as the market adjusts to provide a more accurate projection of the company’s potential.
Keeping an eye on growing revenues and steadily increasing profits is normally an obvious sign of success. Yet there are some very high-profile companies which command valuations in the many billions of dollars who are only on nodding terms with profit.
Twitter has only occasionally turned a profit, despite a $37.6 billion value, while Uber, with a value of $55 billion, has only turned a profit once since 2014 – although its increasing revenues suggests it may soon be turning the corner.
As ever with making an investment, those looking to commit need to do their due diligence.
Researching an emerging tech company and its competitors, monitoring trends and identifying the true pioneers is, as recent history has demonstrated, no easy task.
Investors should recognize and accept the risks associated with investing.
Certain investments may require you to keep your holding for periods of many years with limited or no ability to resell unless there is a strongly regulated secondary market.
You may also have limited access to periodic reporting, see your holdings decrease and increase in value, or even lose your entire investment.
Investors should decide for themselves whether to make any investment, basing this on their own independent evaluation after consulting with financial, tax and investment advisors.