Best Technology Stocks 2022 – Forbes Advisor UK – Investing – Forbes

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Published: Jun 1, 2022, 1:05pm
The world is driven by technology. As a stocks and shares investor, it therefore makes sense to have exposure to companies that occupy this important and all-encompassing industrial sector.
Technology – ‘tech’ – stocks include any business that provides a technological product or service.
This covers a wide sweep, from computer hardware manufacturers and microchip makers, to social media platforms and companies that provide cloud computing services.
The majority of the world’s leading tech companies are based in the US. In investing terms, they tend to be pigeon-holed as so-called ‘growth’ stocks – companies considered to have the potential to outperform the overall market because of their prospects.
Tech companies thrived during the lock-downs associated with the Covid pandemic, when services underpinned by technology flourished. However, as more of us have returned to work and spent less time at home, the tech sector has experienced a reversal in fortune.
For example, the tech-heavy NASDAQ index in New York has lost around a quarter of its value during 2022 as companies reel from failing to meet earnings expectations.
Investors have queried whether stocks that benefited from a benign economic environment will be able to continue doing so as both interest rates and inflation rise, and recessionary clouds start to gather.
Conversely, investors looking to buy the dip after stock market falls may believe enough negative news is already embedded in the sector and the only way is up.
Either way, to give you a flavour of the tech sector, we’ve profiled a dozen of the largest companies by stock market capitalisation (based on Morningstar figures dated 27 May 2022).

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Table 1: Major global technology stocks

48.4%

30.9%

22.3%

48.4%

30.9%

22.3%

Apple is one of the few stocks in the world valued at more than a trillion pounds. Nowadays it is the most valuable company in the world, although the computer-to-smartphone maker’s beginnings are far humbler, having been founded in a garage in Los Altos, California by Steve Jobs and Steve Wozniak in 1976.
Apple is so big it, as an investor, it can be difficult to avoid. For example, the stock accounts for around 6% of the US S&P 500 index by weighting, giving it a hefty presence in any US or global index tracker fund.
29.2%

31.2%

25.5%

29.2%

31.2%

25.5%

Computing giant Microsoft was founded in 1975 by Bill Gates and Paul Allen in Albuquerque, New Mexico. The company revolutionised the computer industry by coming up with some of the first software that made personal computers accessible to the general public. Even following the exit of its founders, the company has continued to grow into another trillion pound-plus business.
23.7%

16.8%

16.5%

23.7%

16.8%

16.5%

Best known as the parent company of the search engine Google, Alphabet was set up in 2015 after a corporate restructuring. Google was founded in 1998 in Menlo Park, California as a project led by Sergey Brin and Larry Page at Stanford University. Today the company is an online advertising and web services giant encompassing well over 100 businesses under its umbrella, including Android and YouTube.
6.8%

17.4%

26.4%

6.8%

17.4%

26.4%

Online retail giant Amazon has revolutionised consumers’ shopping experiences. In a nutshell, it’s a multinational technology company that focuses on e-commerce, cloud computing, digital streaming and artificial intelligence. It is one of the world’s most valuable brands.
1.91%

4.72%

19.6%

1.91%

4.72%

19.6%

Meta Platforms, formerly Facebook, is a social technology company responsible for products that help people to connect and share with friends and families through mobile devices, personal computers, virtual reality headsets and in-home equipment. Businesses within the Meta umbrella include Facebook, WhatsApp the messaging service and Instagram.
36.1%

22.7%

22.0%

36.1%

22.7%

22.0%

This Taiwanese-based company is mainly involved in the manufacture and sale of integrated circuits and semiconductor products. The company’s products are found in personal computers, information applications, wired and wireless communications systems, industrial equipment and consumer electronics.
70.2%

38.3%

50.0%

70.2%

38.3%

50.0%

NVIDIA was created in 1993 to produce graphic cards for the evolving personal computer market. The company remains an integrated circuit maker, producing components that support everything from computers to phones and gaming consoles.
9.31%

17.7%

21.9%

9.31%

17.7%

21.9%

Visa Inc. is a payments technology company that provides digital payments across more than 200 countries and territories. The business connects consumers, merchants, financial institutions and other customers to electronic payments. The company’s transaction processing network, VisaNet, provides authorisation, clearing and settlement of payments transactions.
-0.21%

3.00%

22.2%

-0.21%

3.00%

22.2%

Tencent is a Chinese holding company that’s headquartered in Shenzhen. Technically a conglomerate, the organisation is best known for owning instant messaging app QQ and the social media site WeChat (the world’s third largest global network). Tencent also has a stake in Epic Games, the US-based games maker.
12.3%

24.0%

24.1%

12.3%

24.0%

24.1%

Mastercard Inc is a technology company that links consumers, merchants, financial companies, governments and businesses around the world enabling to use electronic forms of payment. Its products include consumer credit/debit and pre-paid cards. Its brands include MasterCard, Maestro and Cirrus and the company also supplies cyber and intelligence products.
42.5%

32.8%

25.4%

42.5%

32.8%

25.4%

ASML Holding is a Dutch holding company operating through an array of subsidiaries across Europe, the US and Asia. The company is involved with the development, production, marketing, sales, upgrading and servicing of advanced semiconductor equipment systems.
Stock market sectors are often divided up further into different industries and sub-sectors. The tech sector is usually split into two main sub-sectors:
Tech companies may have a foot in both hardware and software camps. Alphabet, for example, makes phones and is also responsible for Google, its search engine, plus a full array of online productivity tools.
At the appropriate part of the economic cycle, growth companies – such as tech stocks – can help accelerate the returns on an investment portfolio.
Tech companies are often at the cutting edge of innovation. Owning shares in businesses like these potentially enables investors to benefit from the breakthroughs that help shape the computing and internet landscape for many years to come.
In the US, tech companies now make up more than a fifth of the S&P 500, the world’s most influential stock market index.
Stock market investing is far from risk-free and the performance of growth stocks in general, and a number of tech stocks in particular, during 2022 has been testament to that.
After a buoyant period stretching over several years, tech companies are now beginning to feel the economic pinch and have issued a string of underwhelming corporate announcements during the first half of this year.
Tech companies are also vulnerable to both disruption and a shifting regulatory environment.
For example, companies with market-leading designs and products can generate big profits but, equally, are susceptible to disruption from new rivals with superior innovations. Regulators, meanwhile, can alter the landscape for emerging technologies in the light of events such as data breaches.
Another point to note is that, in contrast to the ‘old economy’ stock sectors of mining and energy, most technology companies pay minimal dividends.
Dividends are payouts to shareholders made by companies out of their profits. They are a common source of income for investors, especially as part of a retirement planning strategy. Tech companies often avoid paying dividends to reinvest in their growth strategies.
Having established that you want to buy tech shares and assuming you’ve decided on a particular company, you’ll be faced with several choices when it comes to actually buying the stock.
Whether you’re a seasoned share trader, or new to the stock market-based investments, you’ll need to open an account with a regulated broker. Stockbroking is a competitive market place and services for non-professional investors come in a range of guises – from online investing platforms to investment trading apps.
Before opening an account, bear in mind the following:
Before buying any share, it’s also worth asking yourself:
Most of the tech companies included in the table above are traded on US markets. You should be able to buy US shares through most online brokers. But beware that buying US shares in dollars incurs a foreign exchange fee (typically 1% of the amount you’re investing) unless you fund the purchase from a US dollar account.
The majority of brokers also charge a slightly higher transaction fee for buying US, rather than UK, shares. If you’re planning on buying and selling US shares regularly it’s worth comparing fees charged by different brokers.
When buying US shares, you will be asked to fill in a W-8BEN form (valid for three years) which allows you to benefit from a reduction in withholding tax for qualifying US dividends and interest from 30% to 15%.
Note that holding US shares also carries to foreign exchange risk. If the pound strengthens against the dollar, your shares will be worth less in sterling (and vice-versa).
As with UK shares, any profit on US shares will be subject to capital gains tax unless you hold them in a tax-efficient wrapper such as an individual savings account (ISA).
Investing directly in individual stocks can be a fascinating and, hopefully, financially rewarding experience. It may also qualify you for shareholder perks specific to the company in question.
Investing directly in individual companies can, however, leave you vulnerable to stock market volatility and unforeseen swings in share prices.
That’s why financial experts recommend that most people invest in a diversified mix of asset classes and funds that hold a ready-made portfolio of upwards of 50 different company shares.
It’s possible to gain exposure to tech stocks via funds in two main ways. Because of the size and dominance of most of the companies in the above list, US and global index tracker funds are compelled to hold a certain proportion of these tech stocks as part of their investment remit.
Alternatively, specialist technology funds invest solely in companies that make up the tech sector.
Associate Editor at Forbes Advisor UK, Andrew Michael is a multiple award-winning financial journalist and editor with a special interest in investment and the stock market. His work has appeared in numerous titles including the Financial Times, The Times, the Mail on Sunday and Shares magazine. Find him on Twitter @moneyandmedia.

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