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Seven rules for tech investing

The overall stock market may have recovered from the Great Recession, but the tech sector has never fully recovered from the dot-com bust in the early 2000s. Here are seven rules for investing in high-tech companies while avoiding wild speculation:

4. Consider mutual funds or exchange-traded funds

Mark Lennihan/AP/File
David Karp, founder and CEO of Tumblr, photographs the Nasdaq screen in Times Square after ringing the opening bell July 11, 2013, in New York. Yahoo acquired the online blogging forum for $1.1 billion in June.

  • By Janice Fioravante Contributor

These diversify away the risk of holding individual technology stocks by holding a basket of securities. "If you were holding an individual stock, it could be down 80 percent," says Mr. Holtzman, "but if you're in a tech fund, some other stocks in the fund might only be down 10 to 20 percent, so you are diversifying out some of that downward spiral."

Some mutual funds and exchange traded funds (ETFs) track the tech-heavy Nasdaq. In late July, the Nasdaq closed above 3600 for the first time since the tech bubble, which peaked at 5048 on March 10, 2000. So is this the time it will come rocketing back?

“Crystal ball predictions are dangerous, but I’d surprised if it reached all-time highs again before 2015 and more likely 2018-2019 – if it makes 7 percent per year, it will take 5.81 years to get back to where it was,” says Frederick.

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Mark Sappenfield
Editor

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