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Big tech companies have the allure of generating great investing returns. What many people don’t realize is how risky these companies can be. In this video, Entrepreneur Network partner Phil Town lays out three reasons why investing in tech stocks may not be the right move.
1. The technology industry is hard to understand. Town underscores how it is often difficult for tech companies to articulate the value of their companies to those not enmeshed in the business. A notable example of putting undue trust in an industry was the dot-com boom of the 90s. Many investors put all their savings into the tech industry, only to have the strategy backfire.
2. Tech products lose competitive advantage through planned obsolescence. This occurs when you see your smartphone or laptop lose the majority of its functionality with a new update. Tech products operate in a rapidly changing industry, and so it can be difficult for tech companies to rise above competitors.
3. Most tech companies are new and unproven. Related to the unpredictable turnover of tech products, most tech companies are introducing new products that the market is not familiar with. New tech companies are especially vulnerable to fluctuations in the marketplace — changes not even established companies are immune to.
To determine if you should put your money into tech stocks, click play on the video.
Related: See the Most Return From a $10,000 Investment With Patience and Rationale
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