Q. I’m Sanjay, and I want to invest in emerging technologies like AI. How can I identify promising tech investments, and what should I know about investing in rapidly evolving sectors like this?
Sanjay, we assume you are a seasoned investor with diverse investments across various asset classes, sectors, etc. Now you want to take a small detour into the emerging technologies sector, given its huge growth potential.
That is a good move but you must do a little homework first.
Understand the technology: Before investing in any emerging technology including AI, it’s important to have a basic understanding of how that technology works.
Research the companies: Identify companies that are at the forefront of developing and implementing the technology. Look for businesses with a strong record of innovation and leadership in the field. Consider factors like revenue growth, profitability, and cash flow. Several tech companies do register a high rate of growth, but they should also demonstrate the potential for sustainable profitability.
Evaluate management teams: Pay attention to the management teams of the companies you’re considering. Strong leadership is often the key driver of success, especially in tech companies. Look at the leaders’ track record, experience, and vision.
Diversify your portfolio: Investing in individual tech companies can be profitable, but it’s also riskier. Diversify your investments across multiple companies and sectors to spread risk. Consider AI-focused exchange-traded funds (ETFs) or mutual funds.
Stay informed: Emerging technologies evolve rapidly. Stay updated on the latest developments and trends in the sector. Subscribe to tech news outlets, follow industry leaders on social media, and consider joining forums or groups dedicated to tech investing.
Long-term perspective: Investments in emerging technologies may require a longer time horizon. Be prepared to stay invested for several years, as technology adoption and market maturity can take time.
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Published: 17 Dec 2023, 11:28 AM IST