From Wall Street to corporate America, the technology sector is a massive investment opportunity. Eclipsing all others, tech companies directly relate to invention and innovation, giving investors huge returns through a substantially growth-fueled and profitable pipeline.
It’s no secret that this industry has produced considerable wealth for many individuals who get in at the right time. There are various factors that have contributed to such glowing success.
Technology Yields Considerable Wealth for Many
Perhaps one of the most notable tech investor success stories is that of Gavril Yushvaev. Yushvaev has investments of more than $500 million in US and European technology startups, including the famed driver app Lyft and delivery service Delivery Hero.
As of May 2023, Yushvaev has a reported net worth of around $1.9 billion — and a majority of this comes from his smart technology investments.
Of course, the keyword here is smart. Investing recklessly can easily ruin portfolios in a matter of moments. However, the advantage to tech investments is the generally common success of fresh and innovative companies.
The Factors Contributing to High ROI in the Tech Sector
While there are many reasons why the technology industry is capable of creating substantial wealth, the following factors are perhaps the most pertinent.
Rapid Growth Coupled with Strong Historical Performance
The tech sector is one of the fastest-growing industries on the planet. In a few years, the global spending in this sector is anticipated to reach tens of trillions — an exciting fact for those looking to make a considerable amount of money.
However, it isn’t just the rapid future growth that creates wealth for tech investors. The entire industry boasts a strong historical performance overall.
The past ten years have delivered an annualized return of almost 13%, compared to a mere 7% for the S&P 500. Moreover, the previous two decades have seen tech stocks return an annualized 16% — double the broader market’s return.
While that doesn’t necessarily correlate to future performance, it remains a fact that has served many investors incredibly well.
Younger generations are becoming increasingly reliant on and comfortable with technology. Since millennials are anticipated to make up three quarters of the workforce by 2025, this demographic holds considerable promise for tech investors.
Consistently Successful IPOs
IPO, or initial public offering, is a term used to describe a private company’s first share sale on the public stock exchange. Essentially, it references a private business’s transition to public ownership.
The majority of tech sector IPOs rise on their first trading day before subsequently underperforming for the rest of their initial public years. After that, they tend to really pick up, and investors thank their lucky stars that they took the chance.
Victorious Mergers and Acquisitions
Whether it be combining two firms (merger) or one firm purchasing another (acquisition), tech companies typically benefit from successful M&As. The most profitable are the likes of Oracle buying Sun Microsystems and Walmart buying Jet.com, however, lesser-known mergers and acquisitions in the sector have been just as successful.