Investing In Semiconductor Stocks

Semiconductor stocks are a good forecaster of the market, particularly at times of uncertain trends, where everything else seems mixed up and is giving out conflicting signals. It’s a no brainer! – We live in a consumer driven economy, and when we spend money, we buy new cars, new laptops, iPods, iPads and all sorts of gadgets. Deep down, they all need a microchip to operate, a new chip to control their new, longest lasting lithium ion battery, a new chip to manage their new graphics card, a new chip to control the new injection fuel system in our car. You can easily notice that all these ‘new’ chips were designed to power new, better products, in anticipation of new consumer buying trends, otherwise the chip maker wouldn’t bother making a new product. All high tech companies employ highly skilled statisticians, whose job is to predict product sales, based on demographic and economic data in a particular country, and at a particular time. These companies order these new chips long before the final product (such as the iPad) is launched, that’s why semiconductor stocks lead the rest of the market: Always check the Semiconductor Index before investing in the stock market: Semiconductor Index – The Key To Stock Market Investing The above charts show an underlying up trend, during a sharp sell off in the stock market, notice that the recent low on the Dow was taken out, that’s worrying to many short-sighted swing traders. In this case however, the majority of semiconductor stocks were in agreement with advanced market indicators, and both suggested that markets should resume their longer term rally. The Nasdaq index also leads the rest of the stock market, and is closely watched by investors, however the semiconductor component of Nasdaq gives a clearer picture. There’s no way in the world that you could possibly follow the Dow Jones trend and actually predict market direction successfully, sometimes even the Nasdaq index is unclear and investing in the stock market becomes a risky game of adverse probabilities. Semiconductor research is part of non-stop defense spending! Successful stock market investing, in any stock sector, does require a thorough investigation of consumer buying trends, and how the economy is expected to perform over the next 6 or 12 months. Semiconductor stocks can predict the underlying direction, but stock investors may still prefer to invest in lagging sector stocks, as these may have higher margin for upside movement. There’s nothing wrong with that, however stock investors can also invest in semiconductor stocks themselves! After all, these are highly influenced by the defense sector, as defense spending ultimately and foremost pours a constant flow money into microchip research! To put this in perspective, think that a single new missile for an airforce fighter plane, requires so much new research and development, and 90% of it has to do with electronics. It’s not much of ‘rocket science’ to develop the actual missile as it is to develop its radar, anti jam system and guidance system. So if you hear that the department of defense is funding a new $10 Billion missile program, I can assure you, as much as $9 Billion will go to semiconductor companies. Electronics can fail or break the whole project, even Bush’s ballistic missile shield system, failed because of its poorly designed guidance system (3 times out of 5 the target wasn’t hit). In fact, I doubt these semiconductor firms could stay in business if it wasn’t for the defense related research they get paid to do. They have the know-how that brings the new chips, which in the end, make consumer products more competitive and more appealing to the buyers. Invest directly in Semiconductor Stocks or use as indicator The bottom line is that, semiconductors matter! And stock market investors can either invest in semiconductor stocks directly, if they are long term stock investors, or just use them as an indicator while investing in other stock market sectors, on a shorter term basis. Stock Market Investing Strategies and Market Speculation by.. Scott Smith Investing The Stock Market © 2008 – 2010 Previous Post >>> Now Is The Time To Buy Shares

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