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 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 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.

world cup 2014A history of the third-place play-offs
Tommy Ramone performing at The Old Waldorf Nightclub in 1978 in San Francisco, California.
peopleDrummer Tommy was last surviving member of seminal band
Life and Style
Swimsuit, £245, by Agent Provocateur

Diving in at the deep end is no excuse for shirking the style stakes

The Mexico chief finally lets rip as his emotions get the better of him
world cup 2014
Spectators photograph the Tour de France riders as they make their way through the Yorkshire countryside
voicesHoward Jacobson: Line the streets for a cycling race? You might just as well watch a swarm of wasps
Life and Style
lifeHere's one answer to an inquisitive Reddit user's question
Life and Style
Several male celebrities have confessed to being on a diet, including, from left to right, Hugh Grant, Benedict Cumberbatch and Ryan Reynolds
...and the weight loss industry is rubbing its hands in glee
peopleDave Legeno, the actor who played werewolf Fenrir Greyback in the Harry Potter films, has died
Mario Balotelli, Divock Origi, Loic Remy, Wilfried Bony and Karim Benzema
transfersBony, Benzema and the other transfer targets
Yaya Touré has defended his posturing over his future at Manchester City
Detail of the dress made entirely of loom bands
Life and Style
There were mass celebrations across Argentina as the country's national team reached their first World Cup final for 24 years
transfersOne of the men to suffer cardiac arrest was 16 years old
Arts and Entertainment
Armando Iannucci, the creator of 'The Thick of It' says he has
tvArmando Iannucci to concentrate on US show Veep
A mugshot of Ian Watkins released by South Wales Police following his guilty pleas
peopleBandmates open up about abuse
Basketball superstar LeBron James gets into his stride for the Cleveland Cavaliers
sportNBA superstar announces decision to return to Cleveland Cavaliers
Finacial products from our partners
Property search
Have you tried new the Independent Digital Edition apps?
Independent Dating

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

ES Rentals

    iJobs Job Widget
    iJobs Money & Business

    Information Security Manager (ISO 27001, Accreditation, ITIL)

    £70000 per annum: Harrington Starr: Information Security Manager (ISO 27001, A...

    Biztalk - outstanding opportunity

    £75000 - £85000 per annum + ex bens: Deerfoot IT Resources Limited: Biztalk Te...

    Trade Desk Specialist (FIX, Linux, Windows, Network Security)

    £60000 per annum: Harrington Starr: Trade Desk Specialist (FIX, Linux, Windows...

    Service Desk Analyst (Windows, Active Directory, ITIL, Reuter)

    £35000 per annum: Harrington Starr: Service Desk Analyst (Windows, Active Dire...

    Day In a Page

    A History of the First World War in 100 Moments: Peace without magnanimity - the summit in a railway siding that ended the fighting

    A History of the First World War in 100 Moments

    Peace without magnanimity - the summit in a railway siding that ended the fighting
    Scottish independence: How the Commonwealth Games could swing the vote

    Scottish independence: How the Commonwealth Games could swing the vote

    In the final part of our series, Chris Green arrives in Glasgow - a host city struggling to keep the politics out of its celebration of sport
    Out in the cold: A writer spends a night on the streets and hears the stories of the homeless

    A writer spends a night on the streets

    Rough sleepers - the homeless, the destitute and the drunk - exist in every city. Will Nicoll meets those whose luck has run out
    Striking new stations, high-speed links and (whisper it) better services - the UK's railways are entering a new golden age

    UK's railways are entering a new golden age

    New stations are opening across the country and our railways appear to be entering an era not seen in Britain since the early 1950s
    Conchita Wurst becomes a 'bride' on the Paris catwalk - and proves there is life after Eurovision

    Conchita becomes a 'bride' on Paris catwalk

    Alexander Fury salutes the Eurovision Song Contest winner's latest triumph
    Pétanque World Championship in Marseilles hit by

    Pétanque 'world cup' hit by death threats

    This year's most acrimonious sporting event took place in France, not Brazil. How did pétanque get so passionate?
    Whelks are healthy, versatile and sustainable - so why did we stop eating them in the UK?

    Why did we stop eating whelks?

    Whelks were the Victorian equivalent of the donor kebab and our stocks are abundant. So why do we now export them all to the Far East?
    10 best women's sunglasses

    In the shade: 10 best women's sunglasses

    From luxury bespoke eyewear to fun festival sunnies, we round up the shades to be seen in this summer
    Germany vs Argentina World Cup 2014: Lionel Messi? Javier Mascherano is key for Argentina...

    World Cup final: Messi? Mascherano is key for Argentina...

    No 10 is always centre of attention but Barça team-mate is just as crucial to finalists’ hopes
    Siobhan-Marie O’Connor: Swimmer knows she needs Glasgow joy on road to Rio

    Siobhan-Marie O’Connor: Swimmer needs Glasgow joy on road to Rio

    18-year-old says this month’s Commonwealth Games are a key staging post in her career before time slips away
    The true Gaza back-story that the Israelis aren’t telling this week

    The true Gaza back-story that the Israelis aren’t telling this week

    A future Palestine state will have no borders and be an enclave within Israel, surrounded on all sides by Israeli-held territory, says Robert Fisk
    A History of the First World War in 100 Moments: The German people demand an end to the fighting

    A History of the First World War in 100 Moments

    The German people demand an end to the fighting
    New play by Oscar Wilde's grandson reveals what the Irish wit said at his trials

    New play reveals what Oscar Wilde said at trials

    For a century, what Wilde actually said at his trials was a mystery. But the recent discovery of shorthand notes changed that. Now his grandson Merlin Holland has turned them into a play
    Can scientists save the world's sea life from

    Can scientists save our sea life?

    By the end of the century, the only living things left in our oceans could be plankton and jellyfish. Alex Renton meets the scientists who are trying to turn the tide
    Richard III, Trafalgar Studios, review: Martin Freeman gives highly intelligent performance

    Richard III review

    Martin Freeman’s psychotic monarch is big on mockery but wanting in malice