Until a few months ago, the NASDAQ was an investors dream.
Seemingly everything you bought would turn to gold. Software companies, hardware companies, e-commerce ventures, biotechs all were gaining 20 to 30 percent a year, with no end in site.
Then the bottom fell out. People actually started looking at earnings for these companies and realized that in many cases, there werent any. But does this mean you should empty your portfolio of NASDAQ stocks? No.
There are a lot of good stocks in the NASDAQ, says Dee Lee, author of Lets Talk Money: Your Complete Personal Finance Guide. If you want a diversified portfolio, youre going to need tech stocks. But when youre choosing stocks, look for companies that have the bricks along with the clicks.
Stores with an offline presence have an advantage over those which are simply Internet-based.
Companies are no longer going to get outlandish appreciation simply because they have an innovative idea, Lee says.
The question isnt whether you should have technology stocks, its how many you should have. Almost everyone has beepers, cell phones, laptops or other technology items in their lives, and even mundane items such as refrigerators are entering the realm of the high-tech with Internet connections and other advanced features.
If you work in the technology industry and understand it, then 100 percent of your portfolio might be tech stocks, but for most people, 20 to 30 percent of their total portfolio is probably a good number, says Lee. If you really want to go after the Internet and e-commerce stocks, you are far better off in a mutual fund with an analyst watching them. They know when to sell a stock because they are more disciplined. If you dont understand e-commerce, dont invest in it.
To be successful at investing, you need to set your goals and time horizon. What do you want to accomplish in what time frame? If youre handling your own investments, you need to pay close attention to the market, because stocks do go on sale. For example, Sun Microsystems and Hewlett-Packard announced good news that should have driven their shares up, but instead, they dropped.
Review what stocks you have in your portfolio and what your target price is for buying and selling, says Lee. If you buy HP stock, are you going to hold onto it for the next 15 years until the kids start college, or will you sell once its price doubles? Set those guidelines up front and make your investing disciplined. Todd Shryock([email protected]) is SBNs special reports editor.