As the tech stocks marched to a new high consistently amid the pandemic, some people are starting to question if they are being overvalued or another dot com bubble is going to happen again. The fact that S&P 500 is now up nearly 55% from the market’s lows and around 7% in 2020 worries the investors as the disconnect between Wall street and Main street widens.
However it is important to take note that the market is always forward looking, which means that it was already looking beyond the lockdowns to a recovery back in April and the economic outlook has improved since then. Also when it comes to investing, we should always look at the long term prospect and the growth potential of these stocks.
This pandemic has reinforced the technology’s fundamental role in our lives, investors can find sources of risk reduction and growth potential in companies that have become digital utilities enabling global networks. For companies and other enterprises, technology is more indispensable than ever. Without a robust digital infrastructure, employees would not be able to work from home efficiently and students won’t have access to online classes.
However, the outlook for big technology is not entirely free from risk of course. Some technological advances are pushing the limits of regulation, especially in privacy, while some technology companies are running up against competition and anti-trust limitations.
Tech stocks are definitely at an all time high right now and it can be difficult to valuate these companies accurately. In general if you wish to invest into tech stocks, you will want to focus your investment funds on established companies that have strong fundamentals and staying power that can make these businesses strong long-term investments. Another alternative will be to buy into Tech funds which gives you exposure multiple technology stocks in just one fund. An advantage of doing so is that you do not have to spend time researching and analysing the individual stocks and deciding which one to buy into.
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