Why is investing in tech different from investing in any other sector?
November 4, 2019
The technology sector is undoubtedly a huge investment opportunity for investors worldwide. In the last decade, it has become the largest segment of the market, eclipsing all other sectors, including the financial and the industrial ones. Now more than ever, technology is associated with innovation and invention and it is now integrated into all other existing sectors, be it health, financial, real estate, or manufacturing.
According to 2019 data from Statista, $3,360 billion has been spent on technology worldwide. Moreover, the growth of the technology sector is linked to the core pillar of the digital age: the Internet. And, as the data shows, there are 4.4 billion active internet users all around the globe. And, if you think that these numbers aren’t surprising, you should know that this accounts for almost 58% of the total global population.
That being said, investing in tech simply makes sense in today’s digital world. But why is investing in an industry fueled by a pipeline of innovative new products and services different from investing in any other sector?
Technology sector relies on innovation
So, you must keep up with it! In today’s digitalized world, the tech sector has the most growth prospects for the future. You don’t have to be an experienced software developer or tech analyst to be aware of the growth prospects of the technology sector.
Technology is integrated into our lives more than ever before, be it at our jobs or in our homes. There is rarely someone who doesn’t own at least one tech device such as a smartphone, a tablet or a computer. Moreover, Internet connection is literally everywhere around the globe and people use it more than ever before. So, it is simply foolish to believe that technology is not here to stay. And, more importantly, to continue to develop and become more innovative day after day.
However, the real challenge comes when investors need to keep up with its rapid pace of evolvement. Similar to those who invest in other sectors, technology investors must stay up-to-date on the latest industry news and development. Yet, as new technologies are invented on a daily basis, this can be a really daunting task.
Technology changes and evolves quickly, and today’s leaders can lose their popularity or even go out of business overnight. Moreover, innovative technology ideas can create a huge trend only to fade out quicker than it was expected.
For example, we all know what a huge trend was Yahoo Messenger many, many years ago. However, due to the fact that the platform couldn’t keep up with the rapid transition of online communication from browsers to mobile phones, it failed despite its large number of loyal users at that time.
That being said, investing in technology requires constant learning and research to keep up with the trends of such a volatile and fast-evolving sector compared with any other existing sectors.
Don’t invest in technology if you are not a tech-savvy
Sorry to say that but if you are not a tech-savvy that knows everything about this industry, it is very unlikely that you will make good investing decisions. While working in a tech company or somewhere where the tech sector is somehow involved doesn’t necessarily require you to be an expert in all areas, investing in technology is a completely different business.
As mentioned before, the technology sector is a fast-evolving one and becomes more innovative every day. So, if you are not a tech savvy who can understand at least the basics of all areas in this sector, it would be extremely challenging to keep up with all the changing trends.
What makes the technology sector different from any other sector is the fact that there is a huge lack of human interaction. For example, in the real estate sector, it is a lot easier for investors to identify market trends based on consumer behaviors and needs. Whereas, in the tech sector, when the concept of innovation can change overnight, it can be difficult to project future market trends that will sell. So, before you decide to invest in tech, make sure that you can keep up with today’s tech-savvy customers.
Choose safe tech investing options
Technology is a very wide-ranging term that has expanded for many years now, creating many areas for investments. Investing in technology provides an exciting space with a number of trends to put your money in from AI, to smartphones, SaaS, the Internet of Things, blockchain, tech stocks, and many more. Yet, make no mistake, the more investment opportunities, the bigger the risks for investors.
Technology investment options offer opportunities for both novice and veteran investors, especially in the tech stocks sector. There are several mature and established companies in the tech sector that investors can choose from such as software companies, hardware, internet information, or telecommunication companies. Moreover, in terms of stocks, investors can choose between areas such as SaaS, Fintech, Social networking, IoT, AI, or cloud computing.
The trick with investing in tech, especially when you are a novice, is to go for the safe areas of the technology sector. For example, what specialists believe to be the safest markets in this sector are Facebook and Google stocks. Both companies have started off as small businesses and grew to be the tech market leaders they are now. And, considering their popularity, it is simply impossible for them to fail anytime soon. So, when you are just starting as a tech investor, you should go for pretty sure bets and buy Google stock or Facebook stock.
Another safe bet is in the technology that specialists are expecting to “change everything”, the 5G technology. The fifth generation of mobile connection is expected to be a revolutionary technology that is worth investing in right now. reputable companies such as Facebook or Alphabet have already started to make massive investments in 5G as well. So, why shouldn’t you?
As with any other investment, there are plenty of risks in investing in technology. And, it is much more challenging primarily because technology can be completely unpredictable which heightens that risk. However, the technology sector provides plenty of opportunities which, if you make your investment decisions wisely, can result in high returns.