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Why is High Tech Stock Volatile ??? |
There is a lot of hullabaloo that owning high tech stock can either provide u high returns or totally wipe out (I may be exaggerating a bit ) ur investments ??? Tech stocks are volatile because new technology rapidly replaces existing technology. Businesses can vanish quickly if they fail to keep up. Thus risks are high, as are potential rewards. Technology changes very fast. What's "in" one day is gone the next. Right now, however, all sectors are volatile. The first guy hit a very good point. Technologies are here today and dead tomorrow. However, a crucial question arises from this that is "why can't they keep up"? You have to realize that most high techs are new ventures, and the funds that are appropriated to them from investors are typically for one product/service that is unique. So, there comes an issue of funding. Older tech companies (and very high tech - think Oracle, Intel ,HP, IBM, etc.) can "hold their breath" and go under water for periods of losses and bad business cycles. Most high techs, however, simply lack the resources (in terms of capital, knowledge, experience, or a combination of those) to pull it off. Here's a stunner for you, about 1 of 1000 business proposals to VC firms make it to being funded, of which about 1 in 3-10 (depending on many things) make it successful. So, those high techs that pay off have to REALLY pay off to offset the expected losses of those that don't. But, if you think those odds suck, just think that in biotech about 1 in 10,000 drugs make it through the complete gauntlet thrown down by the FDA - now do you wonder why they don't want to let the government regulate prices? HD-DVD versus Blu-Ray |
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