Investing in Information Technology – Things to Consider

The dot-com bubble still reverberates through the investing world.  Fortunes were made and lost in the early days of the internet, and investors still have a sour taste in their mouths.  But investing in information technology, while still risky in some cases, does carry with it a wide range of possibilities including the chance for serious returns on your investments.  The key is to know just what to invest in and not to simply buy up shares in what you think is going to be the next great company just because you think that their services are cool.  Here’s a look at some things to keep in mind when you’re thinking of investing in information technology.

First of all, look beyond the product itself.  Instead of looking at the company that’s churning out the next new tablet, take a look at what components are inside that tablet.  Do they use similar components in all their products, and do competitors use them as well?  The best gadgets won’t run without processors, chipsets, and even software, so take a look at the companies making the components that actually make major products possible.  Chances are that investing in information technology at that level is much safer and profitable than buying into the next big thing.

Also try to find out how much a company is spending on research and development.  Apple paved the way for IPods, for example, but it kept pushing boundaries and possibilities.  A company that isn’t spending on R and D is putting too many chips into one basket, and may not be the safe bet for your money when you’re thinking of investing in information technology.  In other words, if all of a company’s funds are coming primarily from one source or one product, they’re literally begging to fail and you should look elsewhere for your investment.

Finally, be sure that if you’re investing in information technology that you’re willing to keep an eye on the company and that you aren’t planning on a long term strategy with them.  Of course, if they keep delivering great items and have a solid future planned out you may be able to stick with them for a while.  But technology can change at the drop of a hat, and you need to be ready to sell when the time is right.  Keep all of these things in mind and you’ll likely find success in investing in information technology.

About Richard Wilson