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What You Need to Know About Investing in Tech Stocks

Investing in stocks can be a great way to try and maximize the worth of your savings. If you have an interest in trading and learning how to do this yourself, then using an online trading platform can allow you to cut out the middleman and avoid paying a fee to have a managed fund.

Of course, knowing which stocks you think are worth putting your money into and when to buy and sell tends to mean knowing a bit about the industry you are investing in. Many investors choose to focus on one part of the market, as this way it is easier to keep up to date on business developments and market trends in order to make smarter investment choices.

One industry some people find extremely good to trade in is tech. Others, however, are a bit put off by it. There is a residual fear that tech companies are unstable after the old dot com crash in the early 21st century, although the market has changed enormously since then. There is also the factor that people tend to think they need to really understand the technology the companies that they are investing in makes in order to make the right choices, and so this can be off putting to people who are not especially technically minded.

However, investing in tech stocks needn’t be frightening.

Here we look at some of the reasons why tech is a great market for new investors, and what you may want to consider as you embark on deciding where to put your money:

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Not All Tech Businesses Are Complicated to Understand

One of the first points to address is that tech is a hugely diverse market. Within it, you’ll find everything from hardware developers through to software companies and even social media platforms. This means you can focus on an area of the market that you are comfortable with conceptually. If you are not someone who is overly technology savvy, then you may want to avoid investing in microchip companies, but you can find companies that do things that are very easy to understand.

A good example is Facebook. If you are internet savvy enough to be considering online trading, then you almost certainly know what Facebook’s selling proposition is to its users – it connects people. You probably also understand its selling proposition to clients too, and how it makes its money. It can give advertisers access in a highly targeted way to all of its free users, who generally go on the site very frequently. If you can understand Facebook, then you can also understand plenty of other online businesses, and you’ll therefore understand things like new features they launch, or news that may affect their stock price. This means that you will be able to competently handle trading with stocks for these types of businesses without becoming a tech guru!

Tech is Essential Enough to Withstand Economic Crises

Another thing to think about when investing in any kind of stock is how the industry you are working with will hold up if things go crazy in the market. Some things, like luxury brands, tend to fare very badly in an economic downturn, and even retailers lose value when people have to start tightening their belts.

However, tech is something that people simply can’t do without, either as consumers or as businesses. This means that, when there is an economic downturn or even a financial crisis, people do not abandon tech and some companies can even begin to gain value over competitors by, for example, offering the best budget personal devices.

Certainly, were there to be a huge economic downturn today, people would stop buying 4k TVs and smart fridges and other such luxury items at the same volume as they currently do. However, they will still need computers, operating systems, basic software, smartphones and other modern-day essentials, and so the investment decisions become about who is offering the best value with these. Tech services that are free to consumers and rely on advertising revenue, such as social media platforms, can also withstand these situations, as the user’s personal financial situation does not impact their choice to use the product, and the selling proposition to advertisers is always the user base.

Tech Doesn’t Stagnate

Another thing to think about when investing in tech is that it is an ever-evolving market, with new companies entering the fray with new innovations, once popular technology becoming obsolete, and the occasional game changing event (like the smartphone revolution, or the rise of social media). This makes tech a good field to invest in because it is a live market, meaning that people will always need to buy new things (either due to their existing products becoming obsolete or worn out, or because something new enters the market and becomes an essential). There is always scope for innovation, too – if you invest in an airline, all they can really do to shake things up is add a new route or come up with a new pricing model. A tech company, on the other hand, can create entirely new products and change the way its customers do things on a massive scale.

Of course, the pace and scope of tech can also be a downside if you can’t keep your finger on the pulse. A tech company usually has far fewer physical assets than something like a supermarket chain, so if they fall out of favor, it tends to be disastrous for its investors, and very quickly. However, if you watch the market and use resources that can keep you informed, like this Money Map report, you will find that investing in tech can be extremely rewarding.

Technology investment is definitely one of the most interesting and fast-paced markets, and there are also some reasons why it can be more stable and robust than many people think. If you are thinking about a long-term trading strategy, tech may well be a good area to focus on.

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