Investing In IT Shares

Posted on Aug 01 Friday, December 2nd, 2016 at 3:48 pm 477
Investing In IT Shares

I don't like the term 'tech-wreck' for the share-market crash that saw hundreds of online businesses bite the dust. It was more a much-needed 'tech-check', shaking out the online 'cowboys' who were out to make a short-term fortune. Yes, a lot of ordinary investors did lose their money as well but, if something seems too good to be true, it usually is.

At the time of the IT share-buying frenzy people were looking to buy into the dot com phenomenon, not looking at the dot com companies themselves. Unfortunately, a number of good online businesses, which could have grown organically to be successful, were also washed away when the tide turned on Internet companies. The negative reaction was almost as exaggerated as the hype that sent the shares skyrocketing in the first place.

The IT companies that will survive, and even thrive, in the future are either the ones with sound business plans and good management or those with extremely deep pockets (and these will be pretty easy to spot). With IT shares, my advice is still to tread carefully and to treat an online company as you would an ordinary business. Before investing, look at the company's track record as well as its projection, look at its business plan and the board of directors and senior management. Experience and expertise is a far better basis for investment than a great idea and a heap of enthusiasm.

There are two types of IT shares: software and hardware companies that make the content, and the communications companies that deliver it. The one thing that makes content companies successful is that they gain the market edge over their competition. The problem is, the competition may well come up with another earth-shattering 'killer app' that leapfrogs it ahead of the rest, only then in turn to be outdone by another operator.

While still competitive, a deliverer of content, like Telstra, is on far more solid ground. Apart from the Internet, they have a strong basis in other communications delivery through exiting telephony, cable television or whatever. But, no matter what types of shares you invest in, it should be for the long term, not for a quick dollar.