mlk_man
08-03-2005, 05:59 AM
Tech Savvy
Jonathan Pond
Financial Planning Information, Inc.
re you old enough to remember the 1990s, a time of boundless investor ardor for technology stocks? Mundane matters like profits -- even revenues -- were considered old-fashioned notions that were irrelevant to the stratospheric potential of these nascent dot.com and other technology stocks. And what a run up it was!
That is, until the spring of 2000, when it all came crashing down, spurring a painful three-year bear market. Amidst the stock market carnage, investors couldn't bail out of technology stocks and tech mutual funds fast enough.
But while stock values have plummeted, the technology industry itself has not. If anything, technology has become an even more important sector, with attractive prospects. If you own a diversified portfolio of stock mutual funds, you undoubtedly own some tech stocks. The combination of software, hardware, and telecommunications companies comprises almost 20% of the total value of the stock market. But sometimes, when the time seems right, it doesn't hurt to increase exposure in a sector that may offer attractive potential.
Technology stocks have been pretty well beaten down, even after taking into account their recent strength. Case in point: The technology stock-laden NASDAQ Composite Index is still down by 60% from its all-time high.
An argument for technology funds is that technology is one of those areas that requires a great deal of diversification and constant monitoring to reduce the risk inherent in tech companies. In other words, you can't just pick a few tech stocks and then forget about them. 'Tis better to pay a mutual fund manager to stay on top of this volatile industry.
Increasing your technology exposure at this time is hardly a slam dunk. Even at currently depressed stock prices, tech stocks still sport price/earnings ratios (P/Es) that are a lot higher than other industry sectors.
The outlook for the technology stocks is just as bright as it was during their heyday in the 1990s. Only now, investors are more realistic and valuations are more reasonable. I wish I could say that this is a great time to invest in technology stocks. No one knows, of course. But as with most investments in the stock market, yes, a year from now you may rue that day in 2005 when you bought an otherwise good technology fund. But a decade from now, you'll almost certainly be glad you did. Think of how prominent the technology industry will be in our lives 10 years hence.
Speaking of good tech funds, three of them are listed below for your consideration.
But, I repeat, don't repeat the mistakes of the late 1990s by investing too much money in technology stocks or stock funds.
Allianz RCM Global Tech D. DGTNX. Minimum initial investment: $5,000. Expense ratio: 1.8%. Three-year performance: 14.61% through May 31, 2005.
FBR Large Cap Technology. FBRTX. Minimum initial investment: $2,000. Expense ratio: 1.95%. Three-year performance: 10.23% through May 31, 2005.
T. Rowe Price Global Tech Fund. PRGTX. Minimum initial investment: $2,500. Expense ratio: 1.5%. Three-year performance: 15.03% through June 30, 2005.
Jonathan Pond
Financial Planning Information, Inc.
re you old enough to remember the 1990s, a time of boundless investor ardor for technology stocks? Mundane matters like profits -- even revenues -- were considered old-fashioned notions that were irrelevant to the stratospheric potential of these nascent dot.com and other technology stocks. And what a run up it was!
That is, until the spring of 2000, when it all came crashing down, spurring a painful three-year bear market. Amidst the stock market carnage, investors couldn't bail out of technology stocks and tech mutual funds fast enough.
But while stock values have plummeted, the technology industry itself has not. If anything, technology has become an even more important sector, with attractive prospects. If you own a diversified portfolio of stock mutual funds, you undoubtedly own some tech stocks. The combination of software, hardware, and telecommunications companies comprises almost 20% of the total value of the stock market. But sometimes, when the time seems right, it doesn't hurt to increase exposure in a sector that may offer attractive potential.
Technology stocks have been pretty well beaten down, even after taking into account their recent strength. Case in point: The technology stock-laden NASDAQ Composite Index is still down by 60% from its all-time high.
An argument for technology funds is that technology is one of those areas that requires a great deal of diversification and constant monitoring to reduce the risk inherent in tech companies. In other words, you can't just pick a few tech stocks and then forget about them. 'Tis better to pay a mutual fund manager to stay on top of this volatile industry.
Increasing your technology exposure at this time is hardly a slam dunk. Even at currently depressed stock prices, tech stocks still sport price/earnings ratios (P/Es) that are a lot higher than other industry sectors.
The outlook for the technology stocks is just as bright as it was during their heyday in the 1990s. Only now, investors are more realistic and valuations are more reasonable. I wish I could say that this is a great time to invest in technology stocks. No one knows, of course. But as with most investments in the stock market, yes, a year from now you may rue that day in 2005 when you bought an otherwise good technology fund. But a decade from now, you'll almost certainly be glad you did. Think of how prominent the technology industry will be in our lives 10 years hence.
Speaking of good tech funds, three of them are listed below for your consideration.
But, I repeat, don't repeat the mistakes of the late 1990s by investing too much money in technology stocks or stock funds.
Allianz RCM Global Tech D. DGTNX. Minimum initial investment: $5,000. Expense ratio: 1.8%. Three-year performance: 14.61% through May 31, 2005.
FBR Large Cap Technology. FBRTX. Minimum initial investment: $2,000. Expense ratio: 1.95%. Three-year performance: 10.23% through May 31, 2005.
T. Rowe Price Global Tech Fund. PRGTX. Minimum initial investment: $2,500. Expense ratio: 1.5%. Three-year performance: 15.03% through June 30, 2005.