investing in tech (ii)

other tech characteristics

–unlike areas like, say, fossil fuels, tech will likely continue to experience strong growth for a long period of time

–tech is also an area where the US has a comparative advantage, due to the presence of  strong tech-oriented universities, the large size of the existing tech community and the easy availability of capital to finance new tech ventures

a French scholar as tech banker

Early in my career, I had an acquaintance who had spent her life to that point studying for a PhD in French literature, intending to teach at a university somewhere.  She should have studied at least some economics in addition, because, like me, she finished here degree just as the Baby Boom finished college and universities stopped hiring new faculty.  I’d become an equity securities analyst; she’d become a banker to tech companies.  Initially, she was worried that her lack of a science background would be a severe negative.  She found, however–as I did–that electrical engineering was far less important than being able to figure out whether there was any demand for the stuff a given tech company made, at what price, and whether there was any competition.

I think this is still true today–meaning that most people can be successful tech investors, provided they’re willing to put in time and effort.  While a technical background (or access to a friend or relative who has one) is a plus, common sense and a little supply/demand economics is much more crucial.

active or passive/individual stock or fund

The simplest, and lowest risk, way for any of us to increase the tech component of our equity exposure is to replace an S&P 500 index fund/ETF with a tech sector index fund/ETF .

There are also subsector funds/ETFs that allow a narrower focus on, to name a few popular subsectors, internet or cypersecurity or semiconductor stocks.  There are even a few actively managed tech ETFs, although it’s not clear that these outperform passive vehicles.

The largest rewards, and the greatest risks, come with buying individual stocks.  My approach to holding an individual tech stock is pretty much the same as for holding any other type of individual stock.

More tomorrow.

 

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