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Seven rules for tech investing

The overall stock market may have recovered from the Great Recession, but the tech sector has never fully recovered from the dot-com bust in the early 2000s. Here are seven rules for investing in high-tech companies while avoiding wild speculation:

3. Limit exposure

Mike Segar/Reuters/File
The Apple logo hangs inside the glass entrance to the Apple Store on 5th Avenue in New York City in April. The run-up in Apple's stock last year excited many investors, but those who didn't follow a disciplined approach got burned later when the stock price plunged.

  • By Janice Fioravante Contributor

Advisers suggest devoting no more than 5 percent of your portfolio to a single stock. Need confirmation? Think Apple, which was up more than 70 percent for 2012 through September, then fell hard, losing most of its gains for the year.

"Apple ran up so high, just like the whole high-tech index did in the late '90s, that sticking to your target of 5 percent gets out of whack and you find your tech portion becomes 15, 20, 25 percent, maybe even 30 percent of your portfolio," says Jim Holtzman, a financial adviser at Legend Financial Advisors Inc., in Pittsburgh. The 5 percent rule forces you to sell your gains.

"Yes, it's hard to do when you see the stock is still going up significantly," he adds. "But today, you'd be happy you stuck to your own rules."

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Mark Sappenfield
Editor

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