Be wary of tech stocks, says Stockspot

Be wary of tech stocks, says Stockspot

The strong performance exhibited by technology stocks since 2012 makes them an attractive investment option, but Stockspot cautioned investors that chasing ‘hot sectors’ could result in poorer longer term returns.


Stockspot chief executive Chris Brycki noted that technology stocks now include the five largest companies globally, but added that “sectors inevitably return to the mean”.

“After a period of very strong returns, a sector is prone to have a period of weak performance. That period of weakness can last years or even decades, so for people who bought late in the cycle it can mean a long wait before making back the money you’ve invested,” he said.

Mr Brycki said stocks tended to reach their peak at the same time they are talked about most, and that investors should be mindful of stocks which appeared routinely in the media.

“If you’re seeing a certain sector in the news day after day, at best you’re late to the party and worst case, you’ve completely missed the boat,” he said.

Investors who are currently thinking of investing in technology should therefore consider the risk of overexposure.

“Anyone looking to start investing in this sector now should be asking themselves if it’s the right time to be focused on tech stocks," Mr Brycki said.

“History suggests that other sectors are more likely to be the big winners of the next five years."

Read more:

Coalition backs down on lifetime cap

CBA fined, writes off $2.5m in loan balances

Central bank policy could steepen yield curves

Labour market remains solid: AMP Capital

New analysts join Contango investment team

 

Be wary of tech stocks, says Stockspot
investordaily image
ID logo
promoted stories

Appointments

investordaily image

Fortnum hires former Centric Wealth CEO

Staff Reporter

Deborah Ralston

SMSF Association names new chair

Katarina Taurian

Curtis Cifuentes

Avenir Capital hires investment director

Staff Reporter

Analysis

Maurizio Canton

Striking a balance between security and innovation

Maurizio Canton

Greg Kuhnert

Backing China in the Year of the Dog

Greg Kuhert

investordaily image

The benefits of good data governance

Steve Singer