The Risks and Rewards of Investing in Tech

Written by Monica Savaglia
Posted August 2, 2018

There are always risks and rewards for everything. And that’s especially true when it comes to investing. No matter what type of investments you find yourself in, there will be risks and there will be rewards.

With some investments, those risks can outweigh the potential rewards. Or the rewards could be high.

What matters the most is that you feel comfortable with what you’re investing in and the potential risks. You don’t want to invest in anything that will let your emotions get the best of you.

The technology sector attracts a variety of investors. And that’s because technology is such a huge part of our lives. It’s only becoming more influential in our daily lives.

This year, we’ve been experiencing opportunities for growth in the following tech sectors: cloud computing; flexible consumption, also known as a pay-as-you-go service business model; machine learning, user-friendly tools, like apps; and data.

But recently, we’ve been seeing some investors pushing away from tech companies because of how some of the most well-known consumer internet stocks like Facebook, Twitter, and Netflix are performing in the market right now...

A Tech Downfall?

We’re seeing these companies experience a downfall because of disappointing earnings reports. And that has a lot of investors running. Again, you never want your emotions to get the best of you when it comes to investing.

You started investing in a certain company because you saw a long-term potential to make money. So, yes, if you see that potential starting to fade away, then maybe it’s time to reconsider your position. But that potential doesn’t seem like it’s fading away anytime soon, especially when it comes to the tech industry as a whole.

There will be sectors that’ll be doing better than others because of innovation and trends.

Ken Allen, a manager of T. Rowe Price’s Communications and Technology Fund, said:

Great opportunities can surface when investors overreact to short-term setbacks for companies. That has happened with and Google (Alphabet) countless times just in the nine years I’ve been managing the portfolio.

What we saw earlier this week isn’t something new. Analysts and investors who’ve been covering the tech industry for years have seen this type of trend again and again.

Opportunities are actually arising for the technology industry. And that's why we've been focusing on tech startups...

The Rewards in Tech Startups

Charles has been working remotely in Tel Aviv, Israel. Earlier this week, he wrote about how he’s been setting up meetings with CEOs of Israeli technology companies.

Tel Aviv has become a hub for tech startups. Charles has been experiencing firsthand the innovation that's coming out of this area. And he’s seeing only rewards coming from it and the startups that it headquarters.

One of those companies was Elastifile, which offers a storage system for cloud services that aims to save users money.

Cloud-computing companies have been huge this year and have seen some amazing returns. I’ve been following a company called Okta since last year when it IPO’d on April 2, 2017. It started trading on the market at $17 per share. And as of open on Thursday, August 2nd, share prices are at $51.39. That’s an astounding 202% increase!

You shouldn’t be running scared from the tech industry. Instead, you should be paying attention to the future of the tech industry. And the future is these tech startups and new companies that are focused on new tech innovations.

In Charles’s article, he mentioned how Western Digital Corporation (WDC) wasn’t the only investor interested in Elastifile. Samsung, Cisco, and Dell also invested in the startup.

There’s a lot going on in tech. Don’t let a few headlines scare you away from the real rewards.

Until next time,

Monica Savaglia Signature Park Avenue Digest

Monica Savaglia

Monica Savaglia is Wealth Daily’s IPO specialist. With passion and knowledge, she wants to open up the world of IPOs and their long-term potential to everyday investors. She does this through her newsletter IPO Authority, a one-stop resource for everything IPO. She also contributes regularly to the Wealth Daily e-letter. To learn more about Monica, click here.

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