How to Invest in Information Technology Stocks

Investing in IT stocks

Whether you work in the information technology field or not, IT stocks can be a worthwhile investment. Companies involved in the information technology industry often have higher growth rates than other types of companies, and choosing the right stocks can make you a lot of money. Even so, it is important to proceed cautiously; these stocks can be volatile, with large swings on both the upside and the downside.

Things You'll Need

• Brokerage or mutual fund account
• Investment funds
• Financial newspapers

Instructions

1. Pick up a financial newspaper like "The Wall Street Journal" or "Investors Business Daily". These publications often feature stories about up-and-coming technology stocks.

2. Consider investing in the company you work for (if you work in the IT field). Many information technology companies have employee stock purchase plans, or ESPPs, that allow employees to buy stock at a discount of between 5 percent and 15 percent off market price.

3. Check out stocks from companies you're familiar with from your everyday experiences with information technology. The stocks of major hardware and software manufacturers can be good places to invest. Just remember: These stocks tend to be volatile.

4. Contact several low-cost mutual fund companies and ask for a prospectus for their technology funds. Most of the major mutual fund families have several mutual funds devoted to companies in the information technology business. Read the prospectus carefully, especially the part concerning expense ratios and other charges.

5. Open an account with a brokerage firm or mutual fund company. If you choose a brokerage firm, consider investing in the NASDAQ 100 index, which trades under the ticker symbol QQQQ. This fund is heavily weighted in the information technology sector, tracking the performance of the NASDAQ stock market.

6. Fill out the application for the brokerage firm or mutual fund company. Make sure you complete all sections of the form. The company will need your name, address and Social Security number so that they can report any earnings and capital gains to the IRS.

7. Mail the completed application, along with your initial deposit, to the address on the application form. Keep in mind that many brokerage firms and mutual fund families have a separate address for overnight mail, so make sure you send your application form and investment funds to the right address.

Resources

• Yahoo! Finance: NASDAQ Tracking Shares
• "The Wall Street Journal": Online News and Stats