The tech-heavy Nasdaq market is definitely a ''buyer's market" where selectivity is absolutely crucial, says tech-expert Stephen Dalton, senior vice president with First Capital Group, in Philadelphia. That means that if you are buying individual stocks you have to "differentiate" between subsectors and firms, he says.
Mr. Dalton likes tech firms linked to business-to-business development on the Internet, as well as firms that service or aid the infrastructure of the Net, such as infrastructure software firms. He remains "out of the market" for large personal-computer firms, which has bolstered his earnings momentum. He is big on optical networking and data storage firms. He likes quality names such as Exodus, Cisco, EMC, Nokia, and AOL.
For mutual-fund holders, buy into a broadly diversified technology fund rather than a narrowly focused fund such as an Internet fund, says Larry Wachtel, an analyst with Prudential Securities.
Dotcoms (where earnings are always said to be just around the corner) are very risky. Why? "Internet firms tend to go out of business," Mr. Wachtel says.
Volatility is not new to the tech sector, notes Boston-based fund manager Fred Kobrick. Stay the course with tech, he says, although you may want to look for successful subthemes within the field, such as beaten-down semiconductor firms.
For your overall portfolio, be certain to be diversified, with holdings in small-, mid-, and large-cap stocks. Have both growth and value holdings. Mid-cap issues have been very strong lately. Also, have international exposure, such as through a diversified international fund, says Russ Kinnel, who heads up equity analysis for information-firm Morningstar Inc., in Chicago.
Bond funds, while subject to market risk, can add stability to a portfolio. Look for top-quality corporate bond funds, or premium-grade municipal funds, says Sam Paddison, a bond expert with First Capital Group.
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