Tech sector, strategy for a bust.

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wannabesavvy

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Hello,

First point to note is that this thread is not intending to discuss whether or not the tech sector is in a bubble. I am a software engineer and most certainly hope it stays buoyant like this indefinitely. What I would like to discuss here is how you would go about a bust on the stock market.

After speaking to a friend working in finance analysis, he has assured me that "It will all end in tears". While I do believe there are many differences between this time around and the so called "dot com" I do believe there is a certain amount of garbage being peddled, with highly inflated price. My guys advice was to keep track of all the tech IPOs, monitor what I think is good and bad.

Then, if cracks begin to show just short these "bad" stocks. If there is true uncertainty in the sector then prices are more likely will drop off quicker due to panic/over correction than they are to rise sharply. That said, things may become very volatile, allowing you to get caught somewhere in the middle.

Another choice would be options but I need to look at this more.

I have found that you can engage in CFD trading without leverage, this is known as Non Margin Trading (NMT).

There have been points in the past where, I would have liked to have shorted some stocks but wasn't set up for it. I also wasn't going to go down the leveraged route for obvious reasons.

What do people think?
 
As a software engineer, your income depends on this sector, so you should not be investing in the sector. Diversification means you should have your investments in other unrelated sectors.

So should you short the sector which would be good diversification?

You would really need to know what you are doing. Given that 99.999% of investors don't beat the market, it's unlikely that you will be able to. If the market is overvalued but not in a bubble, that is not a good enough reason to short it. If a bubble develops, you will lose an awful lot of money. We are in a weird world of QE at the moment where prices are artificially high. But they may well stay artificially high for a very long time.

If you want to experiment with it, why not run a model portfolio first. If you decide that a share is overvalued, then pretend that you have shorted €10,000 worth of the shares. Do it for a year or so before committing any real money. Even after a year, if you are in profit, you won't know whether it is due to luck alone. But if you lose, you might see that the only way to make money from the stockmarket is to be a boring long term buy and hold investor.


Brendan
 
i think going forward , tech will outperform every other sector , technology is becoming more and more important by the day , google appears to be taking over the world
 
The dominant tech companies in the 1920s were wireless companies like RCO and railways.

The very nature of technology means that there is constant development and winners and losers.

Technology companies or even the Nasdaq are not assets classes in the proper sense of the word.
 
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