Facing the Risks: Should You or Shouldn’t You Be Investing in Technology Industries

Tech stocks are known to be a risky investment. However, if you’re not a stock trading greenhorn, you might find it to be quite lucrative indeed. In fact, it’s one of the best ways to get massive gains – if you know what you’re doing, that is. But you know how it goes… no risk, no reward. In case you don’t mind playing with fire for a bit, this might just be the right kind of investment for you.

The tech industry requires specialized knowledge

It’s a good idea to stick to investing in the type of industries you’re familiar with. So if you’re the tech-savvy type, you might want to try your hand at it. Otherwise, sticking to other industries is probably the wisest move to make.

There’s no need to be an absolute master, though. Just the basic kind of understanding should suffice. So if this sounds like you, go for it! As long as you stick to investing the kind of money you’re prepared to lose if things go south, all is fine and well. Pouring your entire life savings into it just because you feel like it, on the other hand, is just asking for trouble.

When picking the tech stocks you want to invest in, consider how much of a problem-solver the company is. How inventive are their products and where do they rank in terms of innovation? Are they satisfying the market’s needs?

The phenomenon of planned obsolescence

If you’ve noticed how quickly some of the tech gadgets you’ve purchased start acting up on you or become substantially less useful than they were when you’ve purchased, you’re not alone. This phenomenon is called planned obsolescence. The theory goes that certain companies design them like this on purpose. Why would they do this, you might ask? The reason is pretty much self-explanatory: to get you to buy the newest version of the product earlier than you normally would.

It’s no wonder why consumers are enraged when encountering this phenomenon in practice, but nevertheless, it’s the reality of the consumerism-driven world we live in. However, if a company is accused of doing this, the backlash comes in the form of lost respect in the eyes of the public. And once the customers’ trust has been broken, it’s hard to establish it once again.

When this happens, the company’s stock value virtually takes a nosedive; but can you truly predict when this is going to happen? Hardly anyone can, making the investment much more of a gamble. If you’re one of the select few can, power to you, and you’ll quickly be able to turn your knowledge into quite a hefty profit. If not, buying tech stocks is a risky move. In the end, it depends on your knowledge of the industry, as we’ve already discussed.

New tech companies are vulnerable to market fluctuations

This makes the tech stokes even more volatile. While new tech companies and their stocks are pretty much a crazy train ride, not even the well-established companies are immune to market fluctuations. The newer the company, the greater the risk associated with investing in it.

Any new entrants may have a promising start but crash and burn not too long into the future. The nature of the tech industry makes any kind of predictions quite challenging, if not impossible. If you do want to go this way, betting on established companies is probably the best course of action.

The kind of companies that have managed to avoid sinking in this competitive marketplace are the ones that are the most likely to yield a positive return on your investment.

The safest route in terms of risk management appears to be investing in companies you’re familiar with. If they’re introducing innovative solutions to the marketplace and if you can trust the leading figures to make wise decisions, you should definitely consider making the investment.

Listen to what the pros are saying

There are many pros who are willing to share their knowledge with their subscribers, and radical technology profits are only one example of this. In essence, you sign up to a mailing list – either in exchange for a monthly fee or by receiving an invitation. Some industry pros are even willing to invite people to join their list for free.

Then, every single month, you receive valuable advice and predictions regarding which stocks are worth your attention. You can do exactly what you are being told, or you could be clever with it and do some paper trading first before investing real money.

Paper trading is pretty much ‘pretend trading’, a practice where you set an imaginary budget and allocate it to pretend stocks. Then, after making these choices (preferably based on the advice you’ve received from the pros), you’re able to see how things fare after a while. If the person you’re receiving advice from is correct most of the time, perhaps it’s time to take the plunge and bring real money into the equation.

If you’re action-driven and don’t feel like losing time (while, at the same time, you still want to retain a little bit of a reserved attitude), investing smaller amounts and only risking what you can afford to lose is also a viable strategy. That way, you’ll get the adrenaline pumping without jeopardizing your entire life savings.

Finally, to get an even broader picture of how things are, consider joining a stock trading forum. By doing this, you won’t be limiting your source of information to what a single person is saying; instead, you’ll receive valuable input from various different people who are experienced in stock trading. In the end, only you can be the judge of who’s worth listening to, but a diversifying the advice you’re getting can only benefit you.

Conclusion

To conclude, whether you should or shouldn’t be investing in technology industries depends on multiple factors; mainly on how much risk tolerance you have and how well-versed you are in reading the subtle cues and trends present in this vertical. If you’re tech-savvy and can’t live without the thrill of high-risk, high-reward kind of investments, the answer is a definite ‘yes’. Otherwise, you should probably consider making another kind of investment instead.