Technology Funds: Risky, Volatile and Likely Profitable

Investing in technology funds has been a popular investment strategy since the mid-90s. Since then, investors have been taken on a roller coaster ride along the way. Here are the basics of investing in technology funds and what to be prepared for as an investor.

Technology Funds

Technology funds are an investment tool that allow investors to get involved in the technology sector of the market. This could include things like the Internet, computers, software, semi conductors and anything else that has to do with technology. This particular sector realized astounding growth in the 1990s. Then after 2000, the technology bubble burst. This left many investor's portfolios in trouble. Since that time, the technology industry has rebounded and investors have realized some growth.

This type of fund is typically made up entirely of stocks and equities. You could get involved with the domestic or international market depending on your investment strategies. All of these funds should be considered growth funds and they can provide an astounding amount of growth over the long-term.

The majority of these technology funds is made up of stock in two different types of companies. They like to focus on the very well-established technology companies that have a large share of the marketplace. This helps provide some stability in the fund itself. The other type of company that they like to acquire for the fund our start-up companies with great ideas. If a fund believes that a company has created a new piece of technology that could be successful they will add stock in a company to the fund. Therefore, part of the fund is made up of growth and part is made up of stability. This helps to average out the overall volatility of the fund.

Quick Movements

As an investor, you will need to understand how these technology companies tend to move in the market. The stocks that are involved in the funds are typically very volatile and are subject to large swings in price. Typically, the prices of these companies tend to trend with the rest of the market overall. However, the movements of these companies tend to be very fast and quick as the rest of the market starts to move. Therefore, you could realize a huge return very quickly if you got in at the right time.

Investment Strategy

Although these funds can be very risky and volatile, they will also likely be profitable for you. Investing in this type of fund is not for the faint of heart and should be looked at as a long-term strategy. If you continue to buy shares into technology funds over a period of many years, your portfolio could show astounding growth. Investing in this type of fund is not for those that prefer a passive form of investment. It should only be done if your main objective in investing is growing your overall portfolio size. If you start while you are young and continue to utilize technology funds, it could help speed up the growth of your portfolio.

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