Investors have their unique techniques for choosing and investing in the stocks. Tech Stocks are causing a huge buzz in the market and for many good reasons. It is quite temperamental when it comes to making higher gains and profits. You may see yourself floating in the air and suddenly buried deeper the next day. But, investing in the right tech companies can assure higher status in the tech stocks. Like the other tech investors and businesses, you must be aware of the methods to take risks. Investors know it that investing in tech stocks is quite risky, and here the risk is the key factor you have to keep in mind.

Investment in tech stocks on the right tech companies can prove to be a greater help for investors that are just starting. The tech companies that are leading in the industry work harder to achieve the highest level. If you manage to identify and invest in the tech companies that are well-versed with the industry, you will hit the jackpot indeed. Regardless of your expensive level, there are helpful ways and tips to pick the winning and leading tech stocks for higher profits.

Best Day in a Week and Time of Day to Invest in Tech Stocks 

Considered as Monday Effects, many investors believe that the first day of the wee is the best time for investing in the tech stocks. But, in reality, the stock market trends usually drop slightly on the first day of the week, and this gives you the chance to invest in the tech stocks at lower than usual prices. It is because of the new details and news released over the weekend or due to the effects of final stock prices on Friday before the stock market closing. Investors must take advantage of other traders’ lower mood or their slow thinking patterns of buying tech stocks on Monday.

If Monday is the best day of the week to buy tech stock, then the time also matters a lot. The time between 9.30 AM and 11.30 AM EST is the most active period in the stock market. Based on your experience level on stocks, you may easily benefit from online and identifying the patterns amongst the tech stocks between 9.30 AM and 10.30 AM. But, if you have less experience in the stock investment, you can still benefit during the morning rush hours by trading between 10.30 AM and 11.30 AM. The market is not very volatile during this period, but it keeps moving faster. It is the time of the day when you can grab the best deals on tech stocks.

The weekend is considered the best time for investment as it gives investors a chance to research prospective tech stocks by delving into the company filings and other news.

Avoid Using Conventional Valuation Techniques

Traditional valuation techniques are considered best for other sectors, but not a viable choice when it comes to tech stocks. The conventional valuation method includes researching the factors, like price to earnings ratio, earnings per share, asset pricing formulas, growth rates, and return on asset calculation. Checking the value of the investment using the conventional valuation method does not always offer the best results and can’t capture the potential growth of the tech stocks.

Investors must make use of Moore’s Law as it tells the processing speed and power of computing chips double each year. Plus, investors must focus on investing in research and development of the products to stay ahead in the market.

Considering the ROI

Since the stocks vary, investors must use a robust formula that other successful investors are using.

Company X has a market cap of $740 Billion and earnings of $55 Billion. So, you have to calculate the return on your investment in percentage. Divide $55.00/$740.00 and multiply it with 100, and you will get an annual return of 7.4%. It is simply the earnings divided by the market cap and multiplied by 100 to get the ROI in percentage. If the answer satisfies you and you feel that you can’t do better with conventional methods, like low-cost index fund S&P 500, you need to take the smart plunge and invest in the right tech companies.

Investors use the S&P 500 as the conventional method for evaluation as it is the benchmark for investors to calculate and compare the returns on investment.

Check Revenue, Place in the Industry and Future of the Industry before Investing 

If you are making more money with the present technology that is being phased out recently, you need to look for other tech stocks that can last longer. If the tech company is helping you make money from pre-selling models and building prototypes, it would be a risky affair indeed. The tech stock company with multiple sources of revenue generation is best for investment.

There are different tech industry categories, including semiconductors, automotive, software, hardware, social media, biotech and IT. So, you need to figure out which category is steady and growing and which one has dropped in the past five years. In many cases, the software stock would take back seat to hardware, and in such a scenario, it is best to invest in tech companies that deal in the hardware category.

The stock and future of a tech company depend on the overall growth of the industry. The tech company manufacturing rotary dial phone would not be a viable option for investment, while the company making apps for healthcare could be a good investment option.

When looking for tech companies for investment in tech stocks, consider these important factors to value potential tech companies and their stocks. Tech stocks work differently from other companies where R&D is not a big deal for investors, and you will find that some basic investment rules apply here. Have fun with these tips and formals and find the tech stock that fits your long term and short term investment goals. You may also seek the help of experts in the field if you are new in the stock market.