It’s Time to Buy Tech Stocks: Four Strategies to Identify Winners in a Down Market

There’s a saying that the stock market trends upward over time, and this adage holds true amidst the market’s current volatility. For investors, particularly those with a conservative approach, this could be one of the most opportune moments to bolster a tech stock portfolio. With the S&P 500 down approximately 5.9% and the Roundhill Magnificent Seven ETF down by 15.9%, lower stock prices offer a chance to buy quality tech stocks that were previously too expensive. But, before diving headfirst into the market, let’s discuss some essential strategies.

Understanding Macroeconomic Risks

While opportunities abound, investors must contend with two significant macroeconomic risks before making bold moves. First, ongoing trade wars could hit hardware sales hard, particularly affecting companies that rely heavily on overseas manufacturing. Second, a potential economic slowdown might impact growth across a wider range of sectors. Those comfortable with these risks should see the recent downturn not as a deterrent but as a chance to acquire undervalued assets.

Focus on Innovation and Quality

According to Daniel Flax, a tech senior research analyst at Neuberger Berman, well-managed companies that continue to innovate will likely be the ones that successfully emerge from this period of fluctuation. Companies like Nvidia Corp. (NVDA), Alphabet Inc. (GOOGL), and Microsoft Corp. (MSFT) are prime examples of firms that are not only weathering the storm but are also creating exceptional value for their customers, thereby enhancing shareholder value over the long term. Flax stressed that these companies, while not immune to cyclical headwinds, are still leading the charge in technology advancements.

Stay Neutral and Flexible

As Ken Mahoney, CEO of Mahoney Asset Management, noted, a rigid stance—whether bullish or bearish—can hinder your investment strategy. Instead, adopt a flexible mentality. Current volatility presents both challenges and opportunities, depending on your investment response. One tactical approach is to set buy orders based on a stock’s established support and resistance levels. For instance, Microsoft’s stock price has ebbed around $350 in the past month. Savvy investors can employ orders around $370 to capitalize on pullbacks. Simultaneously, establishing sell points near resistance thresholds (like $400) can help you optimize returns during rallies.

Track Performance with Moving Averages

It’s essential to confirm whether a stock is on a positive trajectory. Utilizing simple moving averages (SMA) can provide insights into a stock’s overall performance. For those with a longer-term investment outlook, the 200-day SMA is particularly insightful. If a stock’s price drops below this level, investors should proceed with caution as it signals a potential turn toward a downward trend. Monitoring these indicators is essential for navigating the current market landscape.

Diversify Within the Tech Sector

Traditionally, diversification occurs across different asset classes—stocks, bonds, real estate, etc.—but it can also be advantageous within the tech space itself. A common pitfall for tech investors is to become overly enthusiastic about single stocks, such as Nvidia, which might perform famously well in a bull market but could expose you to painful losses during downturns. Mark Malek, chief investment officer at Siebert, suggests that incorporating less volatile tech stocks can bolster your portfolio’s stability. Microsoft, with a beta of 0.92, is notable for its lower volatility compared to Nvidia’s lofty beta of 1.97.

Final Thoughts: Tactical Buying in a Volatile Market

As we head deeper into 2025, it’s crucial to approach the market with both caution and strategy. The golden rule remains: invest in high-quality companies that are actively innovating, while also employing tactical approaches to buying low and selling high. Remember, although today’s market may feel precarious, the potential for growth remains very much intact for those willing to do their homework and act prudently.

In conclusion, seize this opportunity to acquire fantastic tech stocks at compelling prices. By staying informed, flexible, and strategic, you can position yourself to reap rewards when the market rebounds, which, based on historical trends, is almost a certainty.