In a narrow sense, the technology sector includes everything from the emerging tech companies, startups to established companies with several billion turnovers. In a broad sense, it includes the stocks related to different kinds of projects these companies are involved with, research, creation and distribution. It may be everything from software development to the distribution of technologically based services.
The two types of tech companies
There are mature companies such as Apple, Microsoft and other tech well-known giants which are evaluated according to their profits, returns and overall sales. However, they also have to work hard to stay on top of the market and to keep the pace.
On the other side are the emerging tech companies that must prove their role on the market and they are evaluated mostly according to their potential for growth. The new companies and tech brands have upsides, but they come with a higher risk for the investors. You must be aware of technology market trends to be able to recognize the best opportunities even among the small tech players.
Returns in tech may greatly vary
Returns in the technology sector during the last decade vires greatly. It topped all sectors during the years 2004 and d2017. On the other hand, during four years between 2008 to 2017, the sector underperformed the average of all industries. Technology market enables a lot of opportunities for people eager to invest since the sector had the highest returns of all sectors ever ranked.
Strong returns doesn’t mean that the tech industry comes without risk. Just like any other sector, maybe a slightly less, it is prone to the booms and busts. The technology sector is the sector that changes most rapidly of all industries. It means that in one moment a company may experience huge returns and profits, but the success can fade out in the blink of an eye since these days many technologies become obsolete and replaced with other ones.
Investment opportunities in the technology sector
Technology market includes everything from the Internet of Things, Driving technologies to website development, blockchain technology and software as a service, fintech, cybersecurity, component maker and many more.
Technology giants like Apple, Microsoft or IBM cannot be seen just like the tech companies any more since they are operating in many other segments related or not to the tech sector.
You can invest in a technology market without having to purchase strictly technological stocks. The best example for this would be the Starbucks which is as you know already the restaurant and coffee shop. However, Starbucks was one of the first companies to take part in mobile payment development. The customers of Starbucks can order and pay via the app, which is the case with most of the restaurant chains today, at least in technologically developed countries.
Since technology has blended into all areas of life, it happens that by investing in companies like automotive or media, you are investing in the technology sector at the same time.
Types of investment in technology market
Tech ETFs
ETFs stands for the exchange-traded funds for investment in a variety of stocks. These stocks are gathered in one stock, tracking a specific index on a stock exchange. Investing in that way, you can shield yourself from the risk in case you are investing in less known companies on the tech market that may carry a bigger risk for investors.
The biggest ETFs in the technological market are The ARK Next Generation Internet ETF, KraneShares CSI China Internet ETF. They are focusing on stocks of varying market capitalization offering exposure to the cutting edge technology companies. ETFs comprise the expense ratio, which represents the percentage used to cover the expenses of management, advertisement and administrative fees. When deciding to invest in ETFs, don’t’ look just for the lowest fees. Look at the profits and overall returns.
Growth and Income Investments
The Tech companies offer the chance to anyone to own shares of the companies that already are part of their everyday lives. The opportunities for both growth or income investors are available. Growth investors are looking for buying shares of a company that is expected to grow in the future. Income investors earn money from the shares of well-established companies through dividends, which are the portion of the company’s earnings.
Tech space abounds in opportunities for both types of investors. This is because the sector is constantly developing. Even when it comes to the well-established giants such as Intel, IBM or Apple the growth is present. The opportunities for investors in the tech market are endless.
