IT stocks offer rewards—and risk

Article Excerpt

The technology industry can be extremely profitable—for those companies that get it right. However, the industry is dynamic and highly competitive, leaving a graveyard full of failed startups and once successful companies that were overtaken by competitors. Investors in this segment need to be extremely knowledgeable about the companies and industry, or perhaps follow a less risky approach by investing in a broadly diversified technology ETF. An important market component Technology-focused companies make up a large part of the publicly listed equity market universe. In the FTSE Global All Cap Index, technology stocks hold the largest sector component measured at 24.7%, well ahead of the second largest component, financial services. And despite occasional meltdowns, the MSCI World Information Technology Index has performed better than the global equity index over the past 20 years. Key components of the IT sector Software companies develop and provide specialized application software for the business and consumer markets or systems software used for systems and databases. The main U.S. companies…