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:

5. Look at the supply chain

Tyrone Siu/Reuters/File
Job seekers wait in front of a closed job centre of Foxconn factory in the township of Longhua in Shenzhen, Guangdong province, in February 2013. Apple Inc's manufacturing partner Foxconn Technology Group has endured riots and worker suicides, which have tarred its reputation and hurt Apple as well.

Investors may want to hold a company that makes a crucial component for a fast-growing firm. The supply chain also gives an idea of what's in the works for a company like Apple, where there's a lot of anticipation surrounding a new product.

Apple designs its products in the United States, but overseas manufacturers such as Flextronics and Foxconn make its products. Rioting at a Foxconn factory involved about 2,000 employees and gave Apple's labor practices a black eye. Now Apple chief executive officer Tim Cook says the company is investing $100 million for a plant in Texas to assemble Macs. Being informed about a company's operations helps investors assess the effect of labor troubles or natural disasters.

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