Is That Promising New Technology Worth Investing In?
We live in a word where technology seems to be advancing at a breakneck speed. It was not too long ago that flip phones were the latest in cellular technology. Now we have smartphones with apps powered by augmented reality. Some of the world’s largest companies, too, are tech businesses. Considering this environment, many new investors are rushing to invest in tech. Investing in tech is hardly limited to buying blue-chip tech stock like Apple or Google. Ambitious investors now prefer to focus on the Googles and Apples of the future and make billions, a la Peter Thiel. There are a number of tech buzzwords swirling around these days—Bitcoin and CRISPR for starters—tempting both new and experienced investors, but it’s worth it to sit back and ponder whether these investments would pan out as the hype makes us believe. The ultimate question boils down to this: is that new technology worth investing in?
Do You Understand the Technology in Question?
Before you invest, it’s absolutely crucial that you know about the technology in question. Is the tech something you understand? For instance, you may have read about Bitcoin in the news and done some research on its future. Still, do you actually understand the technology behind Bitcoin and what makes it work? If the answer is “sort of” or a resounding “no,” then you shouldn’t invest in Bitcoin. Veteran investors like Warren Buffet constantly advise newbies not to invest in anything that they don’t understand. Making financial decisions regarding a company hinges on how well you understand the product and if you don’t comprehend the product at all, you may not get anything in return for your money. Tech is one of the most difficult sectors to understand. It notoriously held back even the legendary Buffet until very recently. Unless you have the educational background or the brains to truly grasp what you are investing in, avoid trying to make a fortune in tech.
Are You Looking For Cheap Tech Stocks to Trade and Get Rich With Real Quick?
You may be familiar with the Hollywood-worthy, rags-to-riches stories of venture capitalists like Thiel, who was once an angel investor for Facebook when it was just a fledgling company. When Facebook did become the global brand it is today, these initial investors sold their shares for millions. Such stories might lead new investors to scour through the pink sheets for tech penny stocks. If you are hoping to try day trading tech stock, you will need to take several factors into consideration. As mentioned above, understand the tech before buying the stock. Also, if you buy and sell tech stock in rapid succession, you may lose out on the Facebooks and Amazons of the future. If you are investing in a new type of tech, expect to hold on to the stock for 5 to 10 years. Give the company time to research and develop its products. If you need help tracking stocks, tickers, and options, there is Finviz for assistance. They have a great tracker and even the Finviz futures page for tracking everything from the DJI to commodities.
Assess the Financial Health of the Company
No matter how promising a new tech looks, investors should run a background check on the company and inspect its books. A few promising tech startups end up like Google, but others go the route of Theranos, the purported blood testing startup whose CEO is now facing a federal fraud investigation. Follow the necessary steps when performing a background check on a new company. Use SEC tools to examine previous complaints or investigations. Sticking to these basic procedures would protect you from possible scams.