Are technology stocks a good investment?

Summary

  • Tech stocks have been highly preferred by a large number of investors
  • Recently, the stocks have largely remained volatile and uncertain
  • Interest is evident, Nasdaq Composite have more than doubled in 15 months

The decision of investing into different sectors is entirely dependent on the potential of the industry in the upcoming years as most of the investors look for companies that can drive up the value of their respective portfolio in the volatile durations.

Focus on less volatile assets

Of late, the stocks have largely remained volatile and uncertain, irrespective of the industry they belong to. All because of the backlash of coronavirus and the renewed worries on the rising spread of coronavirus cases linked to the Delta variant.

As far as the risk and return potential associated with various sectors, the market participants always go after the favourability of the upside as most of them often overlook various exposures to risk when a stock is gaining attraction with a history of market-beating returns.

Innovation-led emergence of enterprises

Particularly, technology stocks have been highly preferred by a large section of people as on the global scale the tech-driven companies and the recently incorporated tech enterprises have managed to replace the age-old business conglomerates in terms of market capitalisation, total revenue, profitability ratios and the market share captured.

However, investors remain quite reluctant in betting on uncertain technology businesses, all thanks to the market-wide lessons taught by the dot-com bubble between 1995 and 2000.

Technology has been driving innovations in the companies that are operating in conventional businesses. Facilitating with the futuristic software applications to the state-of-the-art equipment, the technology companies have thoroughly supported the traditional business empires alongside thriving in their own space.

Also Read | Which are the 3 stock market investment blunders you should avoid

Transformational change

With the considerable shift of consumers to the online space, most of the businesses have gone digital through their webpages and mobile applications acting as the digital stores, while the sales volume through the online channels have spiralled like anything, especially in the last decade.

From converting a potential consumer into your effective customer to exploring the untapped markets has been possible due to the wholesome usage of tech-enabled applications. In the last two decades, the technology companies have bifurcated themselves and have established their operations on the basis of services and products.

Enormous gains

The mammoth-scale appreciation in the share prices of large-cap, as well as some of the small-cap technology companies in the last decade have tabled them to the top of the well-diversified conglomerates, in terms of stock market value, as well as the yearly turnover, with some of the multi-year-old corporations struggling to keep their businesses afloat.

According to the historical data available tech-heavy benchmark Nasdaq Composite, the index has advanced approximately 440% in the last decade, while it has leapfrogged more than 900% from the lows recognised during the global financial crisis of 2008.

The index contains who’s who of the technology heavyweights including Apple, Google, Microsoft, Facebook, Amazon, Tesla, Netflix, PayPal, Nvidia, Comcast, Twitter etc. Surprisingly, the key indicator has more than doubled the shareholder’s wealth after correcting sharply in the pandemic-driven global stock market meltdown during March-April 2020.

Importance of tech

It is because of technology only, that most of the individuals working with tech-enabled companies have managed to keep up their professional obligations. The daily tasks of a regular working day during the ongoing work-from-home regimen including video calls, sending an email via phone, signing documents, connecting mass gatherings over video conferencing, convening high-level meetings of international delegates and several other technical requirements are being managed with the help of various tech-enabled applications.

Also Read | What are the best tech stocks on FTSE?

It seems a matter of time when the economies reopen following which the employees are expected to return to workplaces but the inclusion of digital solutions won’t stop with the regularly expanding dependence over these services and ease of usage.


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