Spending time with my young nieces and nephews over the Christmas break I was introduced to not one but two new acronyms: FOMO and JOMO. FOMO (or, fear of missing out) is commonly employed in relation to parties and fashion labels but also, I’ve been told, new technology.
No teenager wants to be left without the latest device that all their friends have got, even if it means paying ridiculous prices for something that may be redundant within a year or even a few months. I must admit to being quite taken with the acronym, which I think can be equally applied to technology investors and technology stocks.
It’s easy to get caught up in the excitement when it comes to tech investing. We hear about a tantalising new invention that’s set to be ‘the next big thing’, and we can suddenly can’t keep our money in our pockets. As we celebrate the 10-year anniversary of the iPhone this week, a quick look at Apple’s 880% share price growth1 since the phone’s launch shows just why people are so keen to be a part of the tech tale.
But not every story has a happy ending. Some stats say as many as 9 out of 10 start up companies fail. It’s an industry where it can, quite literally, pay to exercise restraint. Allow me to slip my other newly-acquired acronym into common parlance – JOMO, or the joy of missing out. Coined as the antidote to life’s increasing pressure to ‘keep up with the Joneses’ (to use a phrase with which I am somewhat more familiar!), it could also equally apply to technology investing. Those who avoided technology stocks when the first bubble burst in 2000 may well know the JOMO feeling.
So how do you position yourself to benefit from the next iPhone, so to speak, without sinking your savings into a raft of unproven and super risky businesses? Achieving this equilibrium is at the heart of successful tech investing. There is a temptation to buy individual stocks for the sake of maximising the ‘big gains’, but it is really a sector where the diversification offered by funds can be a sensible approach to lowering your risk while still being involved.
One fund I particularly like is AXA Framlington Global Technology. Manager Jeremy Gleeson exhibits a strong preference for ‘new technology’, yet doesn’t invest in start ups or what he calls “blue sky companies” – those with great ideas but no income and burgeoning development costs. He waits for companies to fully develop their products and his strategy is as much about avoiding the losers as it is finding the winners – the perfect advocate for a FOMO vs JOMO philosophy!
Another way to get some exposure is to buy an equity fund that has an overweight to technology, while also investing in other industries. A standout option is Baillie Gifford Global Discovery. The fund has an aggressive nature and its manager, Douglas Brodie, looks for businesses that are disrupting existing models, which may well be loss-making at the point of investment but which, he believes, will achieve significant future profits. Each member of his specialist team has expertise in industries outside of finance, so they can truly understand the companies in which they invest.
For a UK focus, it’s also worth mentioning L&G UK Alpha Trust, which currently has just over 20% of the fund invested in technology stocks2. Manager Richard Penny aims to provide long-term growth from UK equities, so he particularly likes smaller companies where he sees a lot of potential for expansion. This naturally leads him to industries like technology, as well as healthcare and consumer services.
1 Google Finance, NASDAQ:AAPL stock data, 12/01/2007–11/01/2017
2 L&G UK Alpha Trust fund fact sheet, 30 November 2016
Please remember, no news or research item is a recommendation or advice to buy. Every Investor is not responsible for accuracy and may not share the author’s views. If you are unsure of the suitability of any investment for your circumstances please contact an adviser. All investments can fall as well as rise in value so you could get back less than you invest.