{"id":3309,"date":"2021-10-08T17:39:00","date_gmt":"2021-10-08T17:39:00","guid":{"rendered":"https:\/\/moneymade.wpenginepowered.com\/?p=3309"},"modified":"2025-06-03T14:35:47","modified_gmt":"2025-06-03T14:35:47","slug":"investing-in-tech-stocks","status":"publish","type":"post","link":"https:\/\/moneymade.io\/learn\/articles\/investing-in-tech-stocks\/","title":{"rendered":"Go for Growth: What You Need to Know About Investing in Tech Stocks"},"content":{"rendered":"\n

Should you just keep it simple and buy Apple stock? Or is there more to it?<\/em><\/strong><\/p>\n\n\n\n

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Every day, it seems like we\u2019re being bombarded with headlines like \u201cBig Tech is becoming the government,\u201d \u201ctechnology is killing privacy,\u201d and the ever-clich\u00e9 \u201cthe tech bubble is about to burst.\u201d<\/p>\n\n\n\n

But when you\u2019re brand new to investing in tech stocks, those might only cloud your judgment. So, let\u2019s make like Christina Aguilera and go back to basics.<\/p>\n\n\n\n

What are tech stocks, anyway?<\/h2>\n\n\n\n

Tech stocks are simply shares in companies that sell technology, covering a wide range of businesses:<\/p>\n\n\n\n

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  • Manufacturing equipment<\/li>\n\n\n\n
  • Selling consumer products<\/li>\n\n\n\n
  • Charging transaction fees<\/li>\n\n\n\n
  • Selling ad space<\/li>\n\n\n\n
  • Offering subscriptions services<\/li>\n\n\n\n
  • Selling user data<\/li>\n<\/ul>\n\n\n\n

    And the list goes on. For the sake of brevity, we can group the best tech stocks into four foundational categories:<\/p>\n\n\n\n

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    1. Hardware<\/strong>: A catch-all term for physical devices and machines, like light bulbs, airplanes, computers, and so on.<\/li>\n\n\n\n
    2. Software<\/strong>: Programs that let us do useful or fun stuff with our devices, like Excel, Chrome, and Angry Birds. You used to have to buy a license for each piece of software, but nowadays many companies offer subscriptions or Software as a Service (SaaS).<\/li>\n\n\n\n
    3. Telecommunications<\/strong>: The technology sector making things we use to communicate over great distances, like satellites, telephones, television, and the internet.<\/li>\n\n\n\n
    4. Information<\/strong>: Companies that provide access to content, marketplaces, and social networks over the internet, such as Yahoo, Alibaba, and LinkedIn.<\/li>\n<\/ol>\n\n\n\n

      Each category can cover more than one tech sector, and some technology stocks have integrated across multiple categories in the past few years. The hottest sectors found among these categories include 3D printing, artificial intelligence (AI), blockchain, virtual reality (VR), and cloud computing.<\/p>\n\n\n\n

      Why investors flock to tech stocks<\/h2>\n\n\n\n

      Eight out of the ten most valuable stocks in the world right now are tech companies. And if you still need more convincing, tech stocks tend to offer the following perks.<\/p>\n\n\n\n

      Higher returns<\/strong><\/h3>\n\n\n\n

      More than half of the NASDAQ-100’s market capitalization comprises technology stocks, while tech companies are less than a quarter of the S&P 500. Over the past decade, the NASDAQ-100’s exposure to the tech sector has helped it outperform the S&P 500 by 2.5x.<\/p>\n\n\n\n

      Better margins<\/strong><\/h3>\n\n\n\n

      This applies more to the software tech sector because companies can scale their product to billions of users in the cloud without any manufacturing costs. Overall, though, earnings growth on a balance sheet is the best indicator of whether or not technology companies are making more money.<\/p>\n\n\n\n

      Market dominance<\/strong><\/h3>\n\n\n\n

      Unlike most industries where companies have to fight for a tiny slice of the pie, tech companies are able to build monopolies in their markets. Google, for example, owns 92% of the search engine market.<\/p>\n\n\n\n

      Faster growth<\/strong><\/h3>\n\n\n\n

      Some of the world’s largest tech stocks aren\u2019t even 2 decades old. This shows how quickly many tech companies have skyrocketed in value.<\/p>\n\n\n\n