The tech sector has come off spectacularly just as the Isa season comes to an end with sales figures...
The tech sector has come off spectacularly just as the Isa season comes to an end with sales figures boosted by the popularity of technology funds. For those clients now worrying they have got in at the top there is some comfort to be had. The Isa money they have contributed is probably not going to hit the market for several more weeks. If the tech market doesn't shoot up in the meantime then they have inadvertently bought on a dip. If it does rebound, and there are signs that is already taking place, then at least they haven't bought into a collapsing market.
Calling the top or bottom of a market is mug's game but the volatility inherent in the tech sector means there is some merit in understanding the art of market timing.
The tech managers themselves are quite bullish and see the fall off as heralding a much needed shake out of the market. For them it is a buying opportunity and so it should be too for anyone else who believes the tech story.
While pound/cost averaging is not much use in a consistently rising bull market it certainly has more attractions in a volatile market such as that generated by the new economy stocks. As such the merits of regular savings into tech funds should not be forgotten.
For anyone who thinks they can trawl the bottom of the market and get right out at the top then the lesson seems to be it is better to play this game through investment trusts.
Henderson Technology investment trust was on a 10% discount last June according to TrustNet, from there it rose to a 20% premium during December before falling back to a 1.6% premium by the end of last week. The focus may well be on the tech stocks but in the background the old economy funds are coming back in leaps and bounds.
Perpetual, which has remained sceptical about jumping on the new economy bandwagon for the sake of it has had an extremely strong rise of late. Again, according to TrustNet figures its UK Growth unit trust saw around a 13% NAV drop between the new year and middle of February and has now recovered all of that. If the new economy can make dramatic returns then so too can the old economy. The result seems to confirm the emergence of a volatile range of new economy stocks coupled with a comeback by some of the out of favour sectors, not all of which are terminal business cases by any stretch of the imagination. No doubt a comprehensive portfolio, be it global or based solely on the UK, is going to need exposure to both.
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Short-term noise or something sinister?