Investing In Information Technology: 10 Tips
If you are thinking of investing your money. you may want to consider these Investing In Information Technology: 10 Tips. So you're a technology junkie who wants to get in on the next big tech IPO because that company is going to be the next big thing. That's the type of thinking that gets the average investor killed in the stock market, especially when that line of thinking most often results in the investor placing a ridiculous percentage of his portfolio on that one stock, which is only compounded by the fact that the bulk of that money was borrowed on margin. So to keep you from being the next victim, here is a list of tips for investing in information technology that should help you keep your head above water:
- Look for great companies with large amounts of cash sitting on their books, and then hope they don't screw it up. You want to see smart acquisitions, an investment in research and development, and maybe a little going back to shareholders.
- It's not too late to get into cloud computing. It takes a while to wrap your head around cloud computing, but it's really not that difficult of a concept. It's simply when a large company allows you to work on programs in their server space. Basically, you don't have to worry about losing information or worry about storage costs.
- Find successful tech products, and then finds out who makes the parts that make them tick. Find out which company's are historically involved with making the parts for the popular technology. Once you find out which companies are involved, look at what other projects they are involved in and take a look at their balance sheets to determine if they are stable.
- Find companies that are not afraid to invest heavily in research and development. Just like you need to diversify your portfolio, companies need to diversify the products they offer so that if one revenue source fizzles out, there are others to support the company in the short term.
- Look for companies that have good reputations and play nice with other companies. Companies that are constantly fighting other companies and refusing to work with other companies are usually the first corporations to go under as a result of their self-inflicted isolation.
- Be wary of a company that generates the bulk of its revenue from one place. If that revenue source dies, the company is likely to follow.
- You need to think globally, and so do the companies that you invest in. You can no longer just buy a technology company just because it's going to be successful in the United States. If people in the United States are in love with a company's products and nobody else in the world like them, you're going to have to sit through some rough earnings reports.
- Always keep your eye on the competition. You should never invest in a company that specializes in one thing without knowing what the other top dogs in that industry are doing. Just like you can't always look for information that supports how you think, you can't invest in an information technology company without making an honest effort to find out what the other companies are working on.
- Don't invest in small information technology companies assuming that they will get bought out. There's never a guarantee that a small company will get bought out. The FTC may not allow it or someone may not have been telling the truth about numbers. You never know.
- Information technology is not the place to buy a stock and hold it forever. If, after doing your research, you feel that a company is generating solid cash flow, has a healthy line of products scheduled to be released over the next year, is working to create new product lines, and is expanding its market share in its dominant area, then you probably have a safe bet for the next couple of years; after that, it's anyone's guess.