How to invest in tech without losing your shirt

by , 03 October 2013

Investing in technology can be very alluring. For starters, there's the dream of making a massive profit on just one investment. If you can spot a tech giant of tomorrow when it's still a minnow, it can make you rich. If you had invested $1,000 in Microsoft shares in 1985, they would now be worth $450,000. And that's not including dividends. Read on to find out how to invest in tech without losing your shirt…

Sure, most of us won’t ever make quite such a lucrative call as buying a tech giant like that, Ed Bowsher in Money Morning UK explains...

But with the pace of technological change moving so quickly, it feels like you must be able to make money.

On the other hand, tech investing can be very risky. It’s all too easy to end up with a portfolio stuffed full of rubbish stocks that have either gone bust, or have long since failed to live up to their early promise.

So here are three tips on how to avoid the biggest pitfalls…

Why tech investors need to look beyond South Africa

Firstly, if you want to be a successful tech investor, you have to look beyond the South Africa. The biggest and most successful businesses are elsewhere.

Above all, that means the US Silicon Valley is the still the world’s technology hub. And you’ll find many more great tech businesses in other parts of the US, especially the north east.

Secondly, don’t ignore the giants of the sector. It’s easy to look at established tech businesses and assume there’s no point in joining the party now. But surely investors have made the big profits already?

Thinking like that could be a big mistake. Look at Apple. It’s true that the company has fallen on tougher times since the death of founder Steve Jobs.

But it’s also easy to forget that just three years ago, its shares were trading at $290 a throw. Now they’re around $470 and have been much higher.

The iPhone had been on the market for three years by September 2010, so you hardly needed to be a brilliant diviner of tech trends to spot that Apple shares had potential at that point. So investing in tech giants when they’re already giants can still make you a good profit.

You’ll already be familiar with other tech giants like Google, Amazon and Microsoft.

And finally, you can reduce your risk by investing in tech giants, but don’t rule out all investments in smaller fry. Once you have a core portfolio in giants, you can afford to take more risk on the edge with some younger companies or brand new technologies.

Whatever you do, don’t ignore technology. It may prove worthwhile for long-term investors to have a sizeable allocation to tech stocks in their portfolio.

Tech shares how the potential for enormous growth

After all, it’s an area where growth is almost inevitable - and that will remain true regardless of what economic turbulence we see in the next few years.

So there you have it, how to invest in tech without losing your shirt.

P.S. If you are thinking about investing in US tech giants like Apple, Microsoft and Google, then read more about it in, Offshore made easy: The painless way to get your money out of South Africa and into the most profitable markets in the world!

How to invest in tech without losing your shirt
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