Are You Overpaying for Technology Stocks?

Have you ever thought of purchasing Apple or Google stock?  Have you ever sat on the sidelines and watched as friends and family seemed to make money in the stock market?  Is it smart to put all of your hard earned money and savings towards purchasing a few individual stocks?  What percentage of your portfolio should be in individual stocks?

Just because you see Jim Cramer rant and rave about it, that doesn't mean you should run out and purchase!

With the invention of the internet, a new technology age began and thousands of Americans began investing online.  Basic supply and demand states that stock prices would drastically increase.  For the most part, popular stocks are largely overpriced, but the question is, how much are they overpriced?  So here's how you should think about individual stocks.

There is some value of the company and no matter how bad the market gets, if the stock price falls far enough, it will allow an investor or group of investors to purchase the company below its value.  That means there is typically some floor to how far a stock price can fall for a particular company.  This is especially true if the company is profitable and has assets.  Now, the main problem comes from the fact that most people purchase well above that floor value and hope that some sucker out there will purchase the same stock for even more.  Don't be that sucker.

This post was reposted from http://finlit.biz/retirement-2/are-you-overpaying-for-technology-stocks/, originally written on January 19th, 2013.