A Primer On Investing In The Tech Industry

The technology sector is an inescapably huge investment opportunity for both corporate America and Wall Street. It is the largest single segment of the market, eclipsing all others (including the financial sector and the industrials sector). More than anything, technology companies are associated with innovation and invention. Investors expect considerable expenditures on R&D by technology companies, but also a steady stream of progress and innovative new products and services.

The Importance of the Tech Industry
These products and services are then disseminated throughout the economy; there is no sector of the modern economy that technology does not touch and that does not rely upon the technology sector to improve quality, productivity, and/or profitability. (Sector funds can provide maximum exposure to financial industry stocks, but this benefit is a double-edged sword. Check out Financial Funds Provide Diversity ... And Risk.)

Tech is also notable for its rampant competition and rapid obsolescence cycles. Although the examples have been used so often they have become cliché, it is nevertheless still a fact that computers used to occupy entire rooms, 640K of RAM was perfectly adequate for a personal computer, and cell phones were heavy bricks the size of shoes. With that constant drive to adapt and overcome competitors with new products, no company can rest easy for long in the tech sector. (Find out why some companies thrive while others flounder in Economic Moats: A Successful Company's Best Defense.)


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