How to invest in technology companies

TL;DR

  • More than 40 percent of the $5 trillion global technology market is in North America, primarily the U.S.
  • Facebook’s Oculus and Snap’s Spectacles are two leading VR products marketed toward consumers.
  • SaaS companies have dominated the tech market in recent years.
  • The technology industry had a 27.3% year-over-year growth in new business formation in 2019, according to the latest State of Swyft Industry Report.

Modern technology touches every part of our lives. The device you’re using to read this article is a great example of the technologies that have become ingrained in our day-to-day lives. Unless you’re living completely off the grid, your life involves, and is probably improved by technology.

As an investor, pursuing opportunities in technology can feel daunting. In this space, competition runs rampant, and products can easily become obsolete in a matter of months. Public allows you to follow companies by adding them to your watchlist, so you can stay up to date with news while you decide where to invest. You can also follow and connect with other investors to dive deeper into specific trends and companies.

The U.S. leads the globe in technology innovation. Our competitive edges, according to the World Economic Forum’s 2018 Global Competitive Index, are business dynamism, strong institutional pillars, financing mechanisms, and vibrant innovation ecosystem. Innovation is a trademark feature of American competitiveness and has powered its global dominance since the industrial revolution.

More than 40 percent of the $5 trillion global technology market is in North America, primarily the U.S. The industry accounts for more than ten percent of our national economy. There are thousands of companies in the U.S. technology sector trading on the stock exchanges, with a great many priced at more than $500 per share.

As these tech companies ask for a higher cost per share, some people with low investment budgets might not have enough money to invest in these companies flexibly. This leads to the common perception that only the wealthiest can capitalize on long-term investing.

Fractional shares, aka slices, change all of that. Thanks to slices, investors can buy stocks without having to purchase the whole share. Now, you can invest in your dream companies with whatever dollar amount you have. For example, if a company you like is trading at $100, but you have only $20 to invest, you could now buy 20% (or 1/5) of the company. Should the price of that stock rise and you decide to sell, you would earn a return in proportion to your original slice.

This is helpful if you want to buy a stock that is more expensive than what you have budgeted. Buying slices of shares in different companies can enable portfolio diversification, and potentially lower your portfolio risk exposure to one single stock. In other words, instead of having all your money tied up with one share of a pricey stock, you can now buy slices of one share in multiple stocks. Buying slices of shares in different stocks can help diversify your investments, potentially reducing your risk.

What qualifies as a technology company?

That’s a big question with a very complicated answer. Because new tech is constantly being developed, often to replace existing tech, the answer is always changing. Public offers stocks and ETFs in several themes that capture modern tech companies.

Enter the Matrix

Virtual reality is a simulated experience that can be similar to or completely different from the real world. Applications of virtual reality can include entertainment and educational purposes. Other distinct types of VR technology include augmented reality and mixed reality. These innovations have enhanced the way some people experience entertainment and gaming, but have yet to crack mainstream consumer culture. Still, most of the largest tech companies have V.R. projects well underway, including Facebook’s Oculus and Snap’s Spectacles.

Rise of the Machines

Artificial Intelligence is defined as the theory and development of computer systems to be able to perform tasks that normally require human intelligence, like visual perception, speech recognition, decision-making, and translation between languages. AI is a broadly used term because it can be applied near-universally across industries. The most common AI user applications are Apple’s Siri and Microsoft’s Cortana.

White Paper Rules

Blockchain can be very overwhelming to try to understand. In the simplest terms, Blockchain can be described as a data structure that holds transactional records that ensure security, transparency, and decentralization. You can also think of it as a chain of records stored in the forms of blocks which are controlled by no single authority. Blockchain was originally created to power the cryptocurrency Bitcoin but has present and future applications that span into insurance claims processing, rights management, healthcare, and even voting. Companies like American Express, Cisco, and Intel are innovating in blockchain technology.

Lost in the Clouds

SaaS—which stands for Software as a Service—is a software licensing and delivery model in which software is licensed on a subscription basis and is centrally hosted. It is sometimes referred to as “on-demand software,” and you probably use it every day if you work in an office environment. The companies that make up this theme—Atlassian, Oracle, Salesforce, and Shopify, are helping to power thousands of enterprise, mid-sized, and small businesses worldwide.

Privacy Please

Digital privacy protects us from bad actors. Its collective definition encompasses three sub-related categories: information privacy, communication privacy, and individual privacy. Given the importance of having well-functioning and secure systems to our economy, cybersecurity companies must constantly innovate to stay ahead of unwanted attacks. This theme includes ADP, Docusign, Facebook, Global Payments, and more.

Why do some people invest in technology?

Technology stocks offer investors a lot of opportunities. In fact, the sector offers the highest returns of all ranked market sectors at almost 35% in 2017. Those strong returns, however, do not mean the technology sector is without risks.

How do you find technology companies to invest in?

Things in tech change super fast, so it’s best to learn the ropes before you dive in. It’s helpful to create a watchlist of stocks and ETFs in the technology sector and get used to the theme. On the Public app, you can start with any stocks and ETFs that interest you, marking them as favorites without investing and keeping an eye on them as part of your daily or weekly routine.

Following news and updates from companies and ETFs you are interested in can help you stay up to date. You can learn a lot about them every day by keeping an eye on relevant market news. For all of the same reasons that a big part of being a good writer involves reading, being a great investor means researching. Learning, tracking, and staying engaged is helpful when building up your knowledge.

The bottom line

Investing in technology is enticing for many people because the sector has experienced exponential growth in recent years. But as we keep innovating, one-time leaders can quickly fall behind or even go out of business. With an even-eyed approach and an understanding of risk and return, you can make decisions based on research and your convictions as both a consumer and an investor.

The above content is provided is paid for by Public and is for general informational purposes only. It is not intended to constitute investment advice or any other kind of professional advice and should not be relied upon as such. Before taking action based on any such information, we encourage you to consult with the appropriate professionals. We do not endorse any third parties referenced within the article. Market and economic views are subject to change without notice and may be untimely when presented here. Do not infer or assume that any securities, sectors or markets described in this article were or will be profitable. Past performance is no guarantee of future results. There is a possibility of loss. Historical or hypothetical performance results are presented for illustrative purposes only.

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