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How tech stocks are keeping the market afloat

FAANG stocks (Facebook, Amazon, Apple, Netflix, and Google), the face of US-driven technology, continue to push the market higher.

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It’s predicted that the fourth World War will be fought with sticks and stones. Until then, the technological roller coaster upon which we ride will soar to new heights. Technology impacts our lives through so many different aspects that investing in it is not only a good idea but a wise one. Whether you are new or experienced in the stock market, you should understand that owning tech stocks as part of a balanced portfolio is a wise decision.

The entire world is going through a crisis right now because of the COVID 19 pandemic. Many lost their jobs or saw a reduction in working hours. Luckily, we have advancements in technology to fall back on; this has played a major role in keeping the stock market afloat. As technology continues to evolve, we can hope for a more prosperous future amidst this global crisis. Those who invested in tech stocks before the pandemic benefitted from extravagant returns. Those who have done their homework find tech stocks are a solid vehicle for investments.

When investing in tech stocks, get to know the different players in the market, both big and small as well as the newcomers. Big tech players like Amazon and Microsoft both saw steady gains as the pandemic spread. Smaller players like Zoom and Lemonade really made a name for themselves as a necessity when the market crashed. After confidentially filing paperwork with the SEC in August, Airbnb is one of the most anticipated IPO’s of the 2020 fiscal year.

What Do Tech Stocks Offer?

Some companies that are engaged in technology-based services have publicly traded shares. The technology sector has a wide range of services including telecommunications, social networks, shopping, and other platforms across various niches. You can invest in companies that offer technological services as well as tech companies that focus on the manufactured equipment.  For example, NVIDIA focuses on manufacturing processors that many Bitcoin miners have recently sought after.

Mitigating Risk

Just like any business deal, there are always risks when investing in stocks. An individual investor must actively monitor assets and weigh the pros and cons. By actively tracking your portfolio’s performance in the stock market, researching and understanding trends, and lastly diversification, investors mitigate potential equity risk especially during periods of market volatility. Understanding where your investment assets are (i.e. stocks, 401k, Roth IRA, etc) and how it all works for you is paramount.

The Rewards of Investing in Tech Stocks

Although there are conservative investors who would shy away from investing in tech stocks, long-term trends have shown the advantages. In fact, as aforementioned, tech stocks can be quite rewarding. Let’s delve into more of the why tech stocks are keeping the market afloat.

Growth

The tech sector continues to grow, and with our new normal, integrates itself into people’s day to day existence. Tech stocks now shine in a way once only held by U.S. Treasury notes. For many, this offers security in the sense that their portfolio is more diversified, therefore mitigating overall risk during market insecurity. Some food for thought: Facebook, Amazon, Netflix, Google, Microsoft, and Apple have pushed the market up nearly 400% from the 2009 low to the start of 2020 when Coronavirus started to become widespread.

Tech companies that are already leaders in the industry make up approximately one-fifth of the entire index’s market cap. During this latest recession, the top-performing tech stocks have solidified their place or have increased growth.

The race to be more technologically competitive and diverse has also led to increased growth. Through new and innovative products, the highest-performing tech companies not only want to solidify their position as leaders in the game but also aim to become solutions to the new normal.

Profitability

Although a lot of businesses have been affected by the worldwide pandemic, the tech market received the softest blow. Ultimately the tech sector has gained more market value due to filling the needs that have arisen. If you wonder how profitable it is to invest in the tech sector, it can at times be described as extraordinary. Furthermore, it is expected that after the pandemic tech stocks will continue to thrive. There’s never a “best time to invest” as hindsight is always 20/20. If you are planning to invest, now is not a bad time to do so, especially since investors can invest with little money by buying fractional shares of expensive stocks. In doing so, you’ll be poised for profitability considering the current stock trends in the tech sector continue.

Liquidity

Even as other financial conditions have deteriorated, the liquidity level of tech stocks is still high and rising. This means that no matter the rate at which stocks are bought and sold, the price is not substantially impacted. Remember that there are inherent risks when investing in any type of stock. Given the current market standing, when it comes to tech stocks, it is less likely that you’ll end up in the red.

Is now the best time to invest in tech stocks? That’s a tough question. Even though tech stocks have outperformed in almost every conceivable aspect, every individuals’ propensity for risk differs. Ultimately, it’s recommended that one should consult with a licensed professional before investing. What do you think? Will you ride this tech wave?

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