New York City, USA - June 8, 2012: Glass entrance of the Apple Store at 5th Avenue near Central Park with Apple Logo.

How to Invest in Tech Stocks

Investing in the stock market requires patience.

New York City, USA - June 8, 2012: Glass entrance of the Apple Store at 5th Avenue near Central Park with Apple Logo.

These tech stocks are smart long-term investments.

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Recently, I’ve been researching quite a few tech stocks, which have led me to the conclusion that taking advantage of the right tech stocks could be a great long-term investment plan. Here are some of my favorite options:

1. Google. The truth is I’m a new investor myself. I began investing a couple of years ago, and I really enjoy learning every step of the way. Ever since I began investing, I’ve been infatuated with Google. Here’s a company that started with an initial public offering that was valued at more than three times the average IPO value for its period. Through the years, we’ve watched as its innovation increased profits, investor trust and ultimately its value. As with any other great stock, its had its ups and downs, but the only major fall we’ve seen in the 10 years it has been public was the economic recession. Overall, on a long-term level, it has done nothing but go up.

2. Apple. Right now, Apple is seen as the most valuable company in the United States, Apple has made incredible strides as a publicly traded company. Like Google, its innovation, especially with regard to smartphones, has led to amazing growth. Its journey from an IPO at $22.00 per share to stock values of over $500 per share didn’t come without its ups and downs. Yet again, if you stuck with it through the downs, you’ve got to be happy with the long-term yield!

3. Yahoo! Yahoo is another interesting stock to follow; and definitely another stock to stick with for the long-term. With an IPO of only $13 per share, Yahoo! has surely grown. We saw the stock price rise to incredible levels before the dot-com bubble burst. After the burst, we’ve seen steady growth. 

All of this leads to a fundamental lesson I learned early on. When I first started investing, I had my mind set on the fact that I was going to make a few investments, cash out in a short period of time and make a killing. Although it would have been great had my plan actually worked out that way, I quickly learned that is not the norm. Trying to time short-term peaks and valleys became almost pointless. So, I decided to pick a few stocks and let them sit for a minimum of a year. Wow, what a great decision. By the time the year was over, I’d made the decision to let it sit for five years and see where it goes. So far, I’m incredibly happy with that decision. Overall, there are two very basic and very important lessons I’d learned:

Don’t jump the gun. When investing, it’s very easy to lose money. As you watch your investment dollars move in the market, the process becomes a very emotional one. Unfortunately, decisions based on strong, knee-jerk emotions usually aren’t the best ones. This is especially true when it comes to investing. When I first started investing, if I noticed my stocks going down ever so slightly, I wanted to sell and put my money elsewhere. After doing this a few times, I really started to notice a dent in my funds.

The reason that type of investing doesn't work out well for me is because there are fees associated with trades. If I watched investments grow by 20 cents, then fall by 11 cents, I wanted to trade out to keep my 9-cent gain per share. However, with trade fees, my 9 cent gain actually became a loss. So, the key here is to set your emotions aside. Don’t trade out as soon as stocks start to go down. Chances are, the stocks will start to go back up soon enough. If you hold good stocks for a long period of time, you have the best chance of profiting.

A diverse portfolio is best. One big mistake I made in the beginning was putting all of my eggs in one basket. All of my investment dollars went to the stock that I figured would do best. Unfortunately, it doesn't always work out the way you predict. Then I read a great article that explained why diversification was so important. The simple fact is, if I put all my eggs in one basket and drop the basket, all of my eggs break. However, if I put a few eggs in several baskets, I don’t mind if one or two break.

In the investing world, it’s a good idea to remember the term "risk vs.reward." Stocks with a higher reward will most likely be more risky than stocks with very little risk, which usually yield very little growth. Having a good balance of low, medium and high risk stocks allow you to maximize your reward while keeping your portfolio safe.

Making money in the stock market can definitely be a challenge for the beginner. However, by learning these two simple lessons early on, you’ll be able to make the most of the market in no time.