Online investors seem to have taken their cue from investment guru Peter Lynch: Invest in what you know.
Given that online investors already have a base of computer and Internet knowledge, it stands to reason that their portfolios are filled with high-tech stocks.
"People's personal experiences are part of what drives investment decisions. If you own a US Robotics modem and it works great, the first instinct is that it is a good stock," said Don Montanaro, chief executive at SureTrade. "That is the first level of analysis."
Montanaro added that more than half of SureTrade's customers invest in tech stocks.
Professional characteristics also play a role in online investors' tendencies toward tech-heavy portfolios.
A high correlation exists between people with jobs in the technology sector and people who have Internet access. This correlation extends to investment strategies, creating a natural inclination toward investing patterns derived from the industry knowledge technology professionals gain through their jobs, said Datek CEO Alex Goor.
"The technology-savvy are the early adopters [of this type of investing] and they will be interested in tech stocks at stage one," said Judy Balint, senior vice president of global marketing and strategic business development at E*Trade (EGRP).
Even while tech stocks currently comprise a large portion of many online investors' portfolios, that may change in the near future, industry watchers say.
As mainstream investors continue to move onto the Internet, and switch from full-service brokers to online brokers, they initially will repeat online the behaviors they learned at their traditional brokerages. This most likely will translate to less of an emphasis on tech stocks in the future, and a shift toward investment patterns that mimic those in the offline world, which include investments that range across a broad spectrum of industries.
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