No place for panic on the helter-skelter ride

The Microsoft mauling led to high-tech meltdown around the world, but the tidal wave of technology will continue for the foreseeable future

What is all that splashing I hear? Arms sticking out of the lake - are they waving or drowning? Aha, I realise now what it is, private investors who have suddenly realised that they cannot walk on water.

What is all that splashing I hear? Arms sticking out of the lake - are they waving or drowning? Aha, I realise now what it is, private investors who have suddenly realised that they cannot walk on water.

Reality has begun to seep into the frenetic world of technology and, despite my warnings that investors should curb their greed, a great many have hung on in the belief that they can defy gravity. (I suppose it is conceivable that there are investors who do not read this column, in which case they have an excuse, but regular disciples will not be forgiven.)

The Microsoft mauling by the American courts has caused high-tech meltdown around the world. But even before that news hit the markets the British high flyers, like Icarus, had their price wings scorched. By midweek Baltimore was 50 per cent off its recent high; ARM Holdings 46 per cent down; CMG 40 per cent down; Durlacher 59 per cent down; Kewill 53 per cent down; GEO Interactive 62 per cent down; QXL 58 per cent down; Thus 52 per cent down. How the mighty have fallen.

At the risk of repeating myself, this price collapse is not a bubble bursting because that would imply high-tech shares were merely a lot of hot air. On the contrary, these are good companies at the cutting edge of a unique revolution in communications. Fortunes are being made, and will continue to be made, by those who bring the best products to the market and those who invest in them.

We are experiencing a correction not a crash and the companies mentioned above, while they may not quickly return to the price heights of a couple of months ago, will continue to impress at a more realistic level. Indeed I believe that, as so often happens, there may well be an over-correction taking place and there could be a bounce back for some of these shares.

So the tidal wave of technology will continue for the foreseeable future and the investor must learn what is perhaps the most important lesson of successful investing: Don't panic. It will be a helter-skelter ride where such traditional failsafes as a stop-loss policy have no place. Prices of these fashionable stocks move so dramatically that operating a tight stop-loss would mean buying and selling several times a day.

We are learning that every tidal wave eventually recedes leaving calm seas. The real danger however is that such waves bring with them a load of flotsam that nobody wants.

So here are a few more pointers for those of you who want to put a proportion of your portfolio into technology and communications shares.

Be prepared for wild price swings and give up trying to apply a stop-loss policy.

Don't be a lemming (those little chaps who jump over the cliff just because their mates are doing it). Shareholder sentiment pushes prices up but has little or nothing to do with company efficacy and profitability. When sentiment wanes and prices return to realistic levels it is seen as a crash.

Look at who's-selling-what-to-whom. The Americans are a couple of years ahead of us when it comes to technology markets and their experience is that internet sites trying to sell to consumers are the most vulnerable.

Consider business-to-business internet companies. Efficiency innovations that save time and costs are the lifeblood of business. When considering a particular share try to make contact with a potential customer of the company concerned. Get a sharp-end opinion of the product.

In technology the safest bets are the companies that make the bits or control the airwaves. The real boom is in the demand for their products and services. But before you buy check that the share price is not already inflated - for instance, you would be feeling very sore this week if you had bought ARM at its peak a month ago.

Look for companies that are already established, probably in a traditional business, and are looking to the internet as a way of developing their existing structure. This will indicate that they are conversant with their market.

Get hold of the latest annual report (or prospectus for a newish company) and read the CVs of those involved. No doubt there will be an abundance of boffins but are there people at the top who have real business experience?

Remember, these are risk stocks so use your own money, funds you can afford to lose if the unthinkable happens.

Learn from this week's lesson. Don't be greedy, watch your investments carefully and when you think they are in danger of being over-cooked, even if they are still rising, turn paper profits into real money and be satisfied.

The shenanigans of the lastminute.com issue are well chronicled and I do not intend to repeat them in detail, but they typify the appalling mess that the latest craze for new issues has created. Investor fury at an allocation system that satisfied absolutely no-one, a meagre supply of private investor shares, a last-minute hike in the offer price, cheques being sent to the wrong people then cancelled, unacceptable delays in sending share certificates and repaying rejected funds...it is a sorry, sorry tale.

The debacle highlights the unsatisfactory system of bringing companies to the market as far as the private investor is concerned. We are treated like second class citizens - last on the list of those to be considered, not privy to the same information as the institutions, unable to participate in the "grey" market because our share certificates have not arrived, made to wait weeks for the return of our funds when demand has exceeded supply.

The present new issues method is a Fred Karno way of doing business that is an embarrassment for the companies, the registrars, the brokers, the institutions, the stock market and the investors. I don't pretend to know the solution but for credibility's sake it is important that these interested parties sit down and sort out some new rules.

Independent Partners; Do you need financial advice on your investments, pension or insurance? Book a free consultation with an independent Financial Adviser at VouchedFor.co.uk

Property
house + home
Arts and Entertainment
tvGame of Thrones season 5 ep 4, review - WARNING: contains major spoiliers!
Arts and Entertainment
tvThe C-Word, TV review
Arts and Entertainment
The Ridiculous Six has been produced by Adam Sandler, who also stars in it
filmNew controversy after nine Native American actors walked off set
Sport
Danny Jones was in the Wales squad for the 2013 World Cup
rugby leagueKeighley Cougars half-back was taken off after just four minutes
Life and Style
The original ZX Spectrum was simple to plug into your TV and get playing on
techThirty years on, the ZX Spectrum is back, after a fashion
News
Tiger Woods and Lindsey Vonn are breaking up after nearly three years together
peopleFormer couple announce separation in posts on their websites
Sport
football
Life and Style
Google celebrates Bartolomeo Cristofori's 360th birthday
techGoogle Doodle to the rescue
Arts and Entertainment
Haunted looks: Matthew Macfadyen and Timothy Spall star in ‘The Enfield Haunting’
tvThe Enfield Haunting, TV review
News
news
News
The Mattehorn stands reflected in Leisee lake near Sunnegga station on June 30, 2013 near Zermatt, Switzerland
news
Finacial products from our partners
Property search
  • Get to the point
Latest stories from i100
Have you tried new the Independent Digital Edition apps?
Independent Dating
and  

By clicking 'Search' you
are agreeing to our
Terms of Use.

ES Rentals

    iJobs Job Widget
    iJobs Money & Business

    Recruitment Genius: Claims Administrator

    £16000 - £18500 per annum: Recruitment Genius: This is an excellent opportunit...

    Recruitment Genius: Senior SEO Executive

    £24000 - £28000 per annum: Recruitment Genius: A Senior SEO Executive is requi...

    Recruitment Genius: Online Customer Service Administrator

    £16000 - £18000 per annum: Recruitment Genius: An Online customer Service Admi...

    Recruitment Genius: Digital Marketing Executive

    £18000 - £22000 per annum: Recruitment Genius: This global, industry leading, ...

    Day In a Page

    Fishing for votes with Nigel Farage: The Ukip leader shows how he can work an audience as he casts his line to the disaffected of Grimsby

    Fishing is on Nigel Farage's mind

    Ukip leader casts a line to the disaffected
    Who is bombing whom in the Middle East? It's amazing they don't all hit each other

    Who is bombing whom in the Middle East?

    Robert Fisk untangles the countries and factions
    China's influence on fashion: At the top of the game both creatively and commercially

    China's influence on fashion

    At the top of the game both creatively and commercially
    Lord O’Donnell: Former cabinet secretary on the election and life away from the levers of power

    The man known as GOD has a reputation for getting the job done

    Lord O'Donnell's three principles of rule
    Rainbow shades: It's all bright on the night

    Rainbow shades

    It's all bright on the night
    'It was first time I had ever tasted chocolate. I kept a piece, and when Amsterdam was liberated, I gave it to the first Allied soldier I saw'

    Bread from heaven

    Dutch survivors thank RAF for World War II drop that saved millions
    Britain will be 'run for the wealthy and powerful' if Tories retain power - Labour

    How 'the Axe' helped Labour

    UK will be 'run for the wealthy and powerful' if Tories retain power
    Rare and exclusive video shows the horrific price paid by activists for challenging the rule of jihadist extremists in Syria

    The price to be paid for challenging the rule of extremists

    A revolution now 'consuming its own children'
    Welcome to the world of Megagames

    Welcome to the world of Megagames

    300 players take part in Watch the Skies! board game in London
    'Nymphomaniac' actress reveals what it was really like to star in one of the most explicit films ever

    Charlotte Gainsbourg on 'Nymphomaniac'

    Starring in one of the most explicit films ever
    Robert Fisk in Abu Dhabi: The Emirates' out-of-sight migrant workers helping to build the dream projects of its rulers

    Robert Fisk in Abu Dhabi

    The Emirates' out-of-sight migrant workers helping to build the dream projects of its rulers
    Vince Cable interview: Charging fees for employment tribunals was 'a very bad move'

    Vince Cable exclusive interview

    Charging fees for employment tribunals was 'a very bad move'
    Iwan Rheon interview: Game of Thrones star returns to his Welsh roots to record debut album

    Iwan Rheon is returning to his Welsh roots

    Rheon is best known for his role as the Bastard of Bolton. It's gruelling playing a sadistic torturer, he tells Craig McLean, but it hasn't stopped him recording an album of Welsh psychedelia
    Russell Brand's interview with Ed Miliband has got everyone talking about The Trews

    Everyone is talking about The Trews

    Russell Brand's 'true news' videos attract millions of viewers. But today's 'Milibrand' interview introduced his resolutely amateurish style to a whole new crowd
    Morne Hardenberg interview: Cameraman for BBC's upcoming show Shark on filming the ocean's most dangerous predator

    It's time for my close-up

    Meet the man who films great whites for a living