Investment Definitions: Technology Stocks and Emerging Markets

As we continue to define investment terms, we come to technology stocks and emerging markets. Each of these terms is similar in that they define a type of stock that could be important to your portfolio, but each term is also different from the other. Let's take a look at what each entails.

Technology Stocks

If it's not immediately obvious, the term "Technology Stocks" covers any stock in the technology sector. This includes software companies, electronics companies, technological development firms and internet-based companies. These companies may develop new computers (or TVs or software, etc.), or they could support other companies through technology, like supplying cloud-based backups. Basically, though, these companies have one thing in common: they are based on serving customers through technology.

Technologically-based businesses can be good investments, or they could be flops. They could be cheap, or they may be rather expensive. But just like any type of stock, knowing your company and the product is the key to deciding to invest in a technology stock. For that reason, it's important to research the potential of the product and the health of the company before investing.

Emerging Market Stocks

Emerging market stocks, on the other hand, are all about supporting countries that may be up and coming. The countries that comprise the emerging markets are those that are mostly low- to middle-class but show promise of moving beyond their current economic status. Often, these EME countries show growth in local investments, which means that the citizens may be more confident in the economic and governmental systems.

Historically, the Soviet Union was a successful EME because it was embarking toward a new governmental structure that included an open market society rather than a closed market. Similar successes are expected in other countries in the future, but investing in emerging markets can be rather risky. For a balanced portfolio, EME stocks should be offset with low-risk investments.

Technology stocks and emerging market stocks could be helpful to your investment strategy, but each sector is different. It is therefore important for potential investors to research the stock investments and balance each high risk investment with lower risk options.

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