TMCnet Feature
January 20, 2021

Tech stocks are a risky but fast-rising market segment. Here's what tech investor should know



Should tech investors take advantage of technology’s growth in popularity last year? Or is it too risky? 

The tech industry is skyrocketing right now. It did so even before the COVID-19 pandemic showed the world how important technology is for overcoming such crises. Yet, in 2020, as the ongoing health crisis turned all business sectors and individuals to technology, you could say that the tech industry had a great year. 



The pandemic made this sector’s importance increase enormously, driven by people turning to more online solutions for their work and home lives. In 2020, everybody heavily relied on technology to perform tasks they used to do before the pandemic but were now reshaped by the consequences of the pandemic like the stay-at-home measures and lockdown restrictions. Now, many of the habits of using technology for even the most basic task being formed, it’s only natural that they will carry into 2021 and beyond, contributing to long-term revenue growth for those tech players who excelled during the pandemic. 

Now, let’s dig deeper into what tech investing really is, what tech investors can invest in, and how to do it. 

Tech investing explained

First things first, let’s give tech investing a definition. 

The tech sector includes everything from major IT companies to players, both big and small, that operate mostly behind the scenes. In this industry, you can find companies of all sizes, start-ups, to billion-dollar worth tech companies. 

In a broad sense, tech investing means investing in stocks related to all types of technology-related products or services, from computers to software, television, websites, or AI. 

These technology stocks provide tech investors with plenty of opportunities for some major returns. In fact, it’s important to note that the tech sector brought the highest returns of all ranked market sectors at 34.28%. This was in 2017, before the sector increased exponentially, driven by the changes the pandemic brought. 

Yet, high returns do not mean that the sector is without risk. While investing in this rapidly growing sector can be rewarding, it can also be risky. That’s because tech stocks come with their own dangers. Why is that? One of the main reasons why tech shares can be a risky investment is the fact that they are often priced based on the promise of their future earnings. In other words, if those don’t materialize, the shares can’t justify their high initial prices. 

Besides that, the tech sector is also known to be pretty volatile too. More precisely, the sector is associates with some violent price swings. 

Yet, as the fund experts from Basta Fonderna explain, “The tech sector isn’t that dangerous for investors because of the evolution of technology in general. Tech companies are more reliable, and new tech products are more useful and well-built as they are designed using market data and research.”

Where can tech investors put their money in? 

Now, if you were to be a tech investor, where could you put your money in? Not sure about the answer? Keep reading below! 

Common areas for investment in tech 

AI

Artificial intelligence was the leading investment area for 2020, according to data from Statista. And this is no surprise as AI encompasses some really innovative areas from the tech sector, such as deep learning, machine learning, and any other technology that can make computers perform tasks that traditionally require a human brain. 

In the context of the current health crisis, AI adoption is expected to be accelerated, especially in the healthcare industry. 

Smartphones

Smartphones are largely used by people all around the world. Data from Statista suggests that there are currently 3.8 billion smartphone users globally. That’s 48.53% of the world’s population! Moreover, smartphone usage time also increased as a result of the health crisis outbreak. In fact, a global survey from March last year has shown that 70% of the responding global Internet users reported using their smartphones more as a direct result of the ongoing pandemic. 

So, smartphones are a great tech sector to invest in right now. What does it include? Any company or start-up, from big players like Apple (News - Alert) or Samsung to secondary players such as the companies who make components, software, and apps. 

Blockchain

Blockchain technology has been creating a lot of fuss in many industries that have started to adopt it. Even during the pandemic, blockchain was praised as a technology that can help health experts and researchers by allowing instant data exchanges and data security. 

Self-driving technologies

Self-driving cars used to be only in SCI-FI movies only a couple of decades ago. Yet, today, we are closer than ever soon to have self-driving cars, trucks, and cars. 

Auto manufactures who are focusing their efforts on developing and improving already existing self-driving technologies also make great investment opportunities for tech investors. Take Tesla and Alphabet, for example. 

Computers and software

Tech investors can also buy tech stocks from companies that make laptops, desktops, and tablets, as well as the software that runs those devices. Besides that, this sector also includes component manufacturers such as Intel (News - Alert), for example. 

IoT

Internet of Things is still a pretty new concept in the tech world. However, it has great potential to be the ground base for many innovative technological advancements. IoT, in a broad sense, can be explained as a network of devices that are interconnected, allowing users to access and control one or more devices from a single one from the network.

Cybersecurity 

Cybersecurity tools have become particularly important as the pandemic was a pretty lucrative period for hackers. The health crisis and all its consequences caused a significant increase in cybersecurity threats and attacks. So, now more than ever before, cybersecurity is a sector particularly interesting for tech investors. 

Chip/ component makers 

Most of the big tech players in the sector don’t make finished devices at all. They source chips and parts from other secondary players who design and create them. This area includes companies that produce memory, screens, and any other part that goes into the final technological device. 



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