What should you know before investing in tech stocks?

Summary

  • Technology is part of nearly every sector from smartphones to medical devices, satellites to cars.
  • Tech stocks are the top grossing stocks in the market these days.
  • Tech stocks are a great way to make profit for short-term investment, though they have their own risks.
  • Geo, TruScreen, SmartPay, Vista Group are some of the leading names in tech stocks listed on NZX.

A technology stock is a stock related to the technology sector, ranging from electronics, robotics to scientific research. Technology sector involves companies operating within the research, manufacturing and creation of technology-based goods or services.

Apple, Microsoft, Amazon, and Facebook are some of the big names in technology sector, propelling most of the sector’s growth.

Technology space includes a diverse set of firms, which are involved in trends related to blockchain, artificial intelligence, Internet of things, semiconductors and many more.

Are technology stocks good for investment?

Technology stocks provide investors with a lot of opportunities and are considered quite attractive for investment purposes. Tech stocks have particularly gained momentum and changed the way people work after the COVID-19 pandemic hit the world and lockdowns were imposed worldwide to control the virus spread.

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For any business, technology is an important and vital part of interacting with customers, clients and other businesses, proving crucial for any business.

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Tech stocks are practically associated with higher-than-average growth because they focus on the future and guarantee the delivery of new, exciting items or new platforms that will enable them to win dominating market positions.

What should you look for before investing in tech stocks?

A technology company’s success or failure is contingent on many factors.

  • Proven track record with robust revenues and low debt
  • High R&D budget for new profitable products
  • Strong reputation in the market
  • Solid growth potential of the goods and services of the company
  • The technological edge of the company as compared to its competitors.

Which are the major tech companies listed on the NZX?

Here are some of the major technology companies listed on the NZX.

Geo Limited (NZX: GEO) is a software business, which caters to field service and field sales teams with innovative mobile workforce management programs. It operates via 2 key solutions that include Geo services and Geo for Sales.

Serko Limited (NZX:SKOASX:SKO) is a NZ-based travel and expense management technology solution provider. The company has operations in the U.S., Australia, and China, and uses Zeno app to manage travel data.

ALSO READ: Take a look at interesting NZX penny stocks from technology sector

Vista Group International Limited (NZX:VGL, ASX:VGL) is a prominent tech solutions provider to the global film industry. It also provides box office reporting software, movie goer data analytics, business intelligence units and other services for movie goers.

Smartpay Holdings Limited (NZX:SPY) is the largest provider of technological products and services to merchants and retailers in New Zealand and Australia. It has delivered over 35k EFTPOS machines to more than 25K merchants across ANZ.

TruScreen Limited (NZX:TRU) is a medical device firm that offers the latest and real-time technology in cervical cancer screening. It provides true detection of pre-cancerous and cancerous cervical cells to help in improving the health and well-being of women worldwide.

Pros of adding tech stocks to the portfolio

Tech stocks provide enormous potential for expanding upwards and creating growth as they are primarily driven by variables such as intellectual property, community engagement, and branding.

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There are many blue-chip firms that have the highest valuation. These stocks are from long-established firms that have given out good returns and dividends due to consistent earnings.

A majority of individuals utilise technology in their everyday lives like having a laptop, a smartphone, using social media, or doing online grocery or clothes shopping. By purchasing a tech stock, an investor may buy a small piece of a company they know and like.

Further, an investor may diversify their portfolio by investing in diverse parts of the technology industry, including sectors such as social networking businesses, hardware makers, software developers, and even green tech companies.

Technologies are proceeding at a fast pace due to higher demand.

Cons of investing in tech stocks

Trading tech stocks comes with certain risks attached. Technology can be difficult to understand sometimes and it is generally considered wise to not invest in a company if there is not enough knowledge about its product.

Some big businesses, such as Amazon and Google, have shares that are quite expensive, making them out of range for a first-time tech stock investor.

ALSO READ: Will New Zealand become a technological hub? Which are the big tech companies there?

There has also been an increase in scammers and fake investment leaders who claim to have insider information of stocks due to their increased popularity. Moreover, increased regulation and government inquiry could lead to criticism against tech stocks, which could influence their future outlooks.

In the case of investing in new tech stocks, thorough research must be done on how the company is making money in the market.

The technology sector is all set to grow bigger with rapid innovations and developments in technologies like machine learning and artificial intelligence. Hence, the sector will always be dominant due to its influence on almost every other sector.

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