that we’ve played it here is through the infrastructure,” he says. “We’re not sure who’s going to be the winner, but we know the Internet will continue to be built out.” Companies that manufacture communications equipment, such as switchers, routers and semiconductors are viable options. (For more Internet support companies, see sidebar.)
Try mutual funds. If you’re a newbie to this game, consider mutual funds, nature’s way of diversifying. Bendele recommends and invests in the Nasdaq-100 index tracking stock QQQ fund (Amex: QQQ), which represents ownership in a unit investment trust. QQQ invests in Nasdaq’s top 100, including Microsoft, AOL and Yahoo!.
Other funds to try include Munder NetNet (MNNAX), the Internet Fund (WWWFX) or WWW Internet (WWWIFX). Although mutual funds may sound less exciting, take a look at these returns: Munder NetNet returned 175.7% in 1999; the Internet Fund, 216.4%; and WWW Internet, 167%. However, even with more diversification, these funds carry the risk of investing in one sector. For even greater diversification, try a technology fund, such as T. Rowe Price’s Science & Technology (PRSCX), which returned 101% last year.
Follow a set model. First, decide your risk tolerance. The National Association of Investors Corp.’s site, www.better-invest ing.org, offers lots of great tips to get you started.
Dale Bryant, a financial advisor and president of the Bryant Group, a New York-based investment advisory firm, says that risk tolerance is more than your age and time horizon. It’s also about your temperament. When you give yourself guidelines according to your comfort level, you’re providing insurance.
Bryant divides his portfolio models into three risk groups-conservative, moderate and aggressive (see chart).
MONITOR YOUR PORTFOLIO CAREFULLY
How can you tell if your stock’s doing well? You can’t exactly compare it to the S&P 500, where only a portion of stocks are high-flying techies. Aside from the Nasdaq, try an Internet index such as the Dow Jones Internet composite, an equity benchmark of companies that generate the majority of their revenues from the Internet. For additional indexes, click on www.internet news.com/stocks, which features an “Internet Stock Report,” daily news and commentary. (For more Websites to aid your Internet investing, see blackenterprise.com.)
One of the greatest skills in investing is knowing when to fold. Indicators to do so include sluggish revenue growth on Internet stocks or slow earnings growth on more established companies. One of the biggest misperceptions? “That Internet investing is easy and you’ll retire rich from it,” says Bryant. “What happens is we [only] hear about the 15% that do really well.”
With the host of new companies that lack long-term records and the outrageous valuations of tech stocks, there’s no magic formula for when to drop an issue. However, you can follow Bryant’s lead. “I don’t have a defined strategy,” he says. “I keep stocks that offer revolutionary products and continue to show momentum.” He asks the following questions: what does the company do? How big is its market? How much more can the market grow? What percentage in market share can this company get? Can it protect its