Having been a tech entrepreneur for more than ten years, Agam Berry knows a thing or two about the common traits of successful companies. He has helped a wide range of clients with direct response advertising campaigns and gained a fascinating insight into the technology sector in the process. Below he provides some useful tips for budding tech investors, who can certainly benefit from his vast experience.
Undoubtedly, the tech industry offers massive opportunities for investors of all types. It is the single biggest market segment, overtaking all others (like the industrial and financial sectors). Investors know that tech firms have to spend significant sums on development and research. However, they also understand the growth potential, supported by a stream of cutting-edge new services, features and products. Here’s the key things to be mindful of, when it comes to tech investing:
Consider the Future use of the Technology
It is vital to assess how technological developments might affect an investment portfolio, and which securities, industries or asset types are more vulnerable to becoming obsolete, due to disruptive technologies. Because technology is constantly evolving, there’s always the chance that a product or process could become redundant, making it harder for a company to compete. These situations can throw up various investment opportunities though. Such opportunities are not confined to the traditional tech industry or Silicon Valley. Actually, the sectors that are most prone to obsolescence and are likely to experience the greatest disruption, are sectors like energy, consumer goods and property.
Do not Panic
A good tech investor profits with patience, which is required due to the volatile nature of this market. As far as selecting new investments goes, it is wise to follow the lead of institutional buyers who regulate the market. These buyers might wish to focus on companies that are blazing a trail or creating a buzz. It is worth remembering that AMZN (Amazon), Apple, Facebook and NFLX (Netflix) outperformed over a long period, and other tech firms are likely to follow this trend in future. Consequently, many investors are waiting for new leaders to surface, before jumping on the bandwagon.
Take out Some Insurance
Once again, because of the market volatility, tech investors often struggle with stock selection. This is why the majority of a portfolio should not consist of single stocks. Apple is a prime example of an industry giant that was thwarted by international problems, such as the Chinese economy, which can leave investors vulnerable to single stock liabilities. For this reason, more investors are embracing buy and hedge methods that enable them to cash in when things go to plan but restrict their drawdown if an issue arises. Other large tech brands that reported major sell offs in the recent past include T (AT&T), IBM (IBM) and FB (Facebook). Single stocks like these should be hedged in an investor’s portfolio, to prevent sizable losses.
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