A Simple Way To Avoid A Tech Crash
Seattle, WA (PRWEB) September 24, 2003 –
Recent events show that investors may yet again be loading
up on tech stocks just as a tech bubble is forming.
“The solution to avoiding another
tech bubble is simple, but often overlooked because many investors’
rational thinking is pushed into the background by greed,”
says Rex Jacobsen, Sr. Editor, BeatTheStockMarket.com. Jacobsen
uses a stock-picking method that enabled him to outperform
the stock market during the tech boom without over-weighting
the tech sector. By not loading up on tech stocks, Jacobsen’s
recommended portfolio was able to grow 21% while the tech-laden
Nasdaq Composite lost 67% during the tech bust. Since 1998,
his stock-picking system has returned 34.9% per year.
“Several recent events seem to be
pointing to an overvaluing of the sector,” continues
Jacobsen. “The P/E ratios of many tech stocks are rising
dangerously high. Just as in early 2000, investors seem to
be driving up the prices of these stocks, but the current
revenue growth is nowhere near what it was during the glory
days.”
“Furthermore, the tech-heavy Nasdaq
Composite has risen 71% since last October. Many companies
in the sector have seen their stock price skyrocket. For example,
Avaya, Inc. has jumped 748% in the last eleven months. Even
more worrisome is the fact that buying on margin is up 25%
this year and much of this is being used to buy tech stocks.
And after all of these tremendous gains, many analysts are
jumping in seemingly late, raising their recommendations for
the sector.”
“The most popular market indices usually
allot only 17-18% to tech companies,” says Jacobsen.
“Yet how many individuals have 30%, even 50% or more
of their portfolios invested in tech stocks? Most individuals
probably don’t even know what percentage of their portfolio
is invested in this volatile sector.”
Jacobsen recommends that investors determine
what their percentage is and adjust it to more evenly match
the market indices if they want to lower their risk. “Limit
the percentage of tech holdings in your portfolio to 17-18%.
Our model portfolio currently consists of only 12.5% tech
stocks and we’ve easily outperformed the market this
year. You don’t need to take on the additional risk
of a large investment in the tech sector to perform well.”
“We aren’t saying to panic and
get out of the stock market or even out of tech stocks,”
says Jacobsen. “That would be a typical overreaction
of many investors. Instead of abandoning tech stocks, merely
pare down your portfolio so it is more evenly diversified
within the major sectors.”
Jacobsen also suggests that if you are a
long-term investor, don’t pull out of the stock market
just because one sector may be overvalued. Since stocks are
historically the highest-yielding investment, Jacobsen says
the key is to always stay fully invested and never try to
time the market.
“We make sure we don’t get blinded
by greed by ensuring we don’t overweight the hot sector,”
Jacobsen says. “And so far, every year we’ve outperformed
the stock market, hence the name of our company.”
For additional information, visit www.BeatTheStockMarket.com
which publishes an on-line investment newsletter.
Original press release can be found here.
CONTACT INFORMATION:
Nancy Wagner
Media Representative
CutToTheChaseMarketing.com
425-415-6427
This article may be re-published as long as the following
resource box is included at the end of the article and as long as you link to
the URL mentioned in the resource box:
Article by Rex M. Jacobsen, Sr. Editor of the investment newsletter
Beat The Stock Market.com.
Since 1998, the company's model portfolio has achieved a return of
31.9% per year. The company's web site can be found at
http://www.BeatTheStockMarket.com.
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