Dot-Com Veteran Tells Retail Investors to Sit Out the Tech Dip

Professional managers of technology portfolios are approaching the sector with caution, and individual investors should be more careful still, according to Ted Mortonson, an industry veteran who came up through the dot-com era.

Mortonson's warning is aimed at people tempted to buy technology stocks simply because they have fallen. He put it bluntly, saying retail investors who jump in now are "taking a knife to a gunfight." The point is that the big funds on the other side of those trades have more research, more information and more capacity to wait out a bad stretch than a typical individual investor does.

The comparison to the dot-com period is hard to ignore. The Nasdaq Composite lost nearly 80 percent of its value between March 2000 and October 2002, and many companies that looked cheap on the way down kept falling for months or years. A lower share price on its own does not tell an investor that a stock is a bargain. It can just as easily mean the market is still repricing expectations that were too high.

Mortonson's comments do not amount to a blanket rule against technology. They do suggest a few practical habits for anyone considering a purchase after a sell-off: check whether the underlying business is actually weakening or simply being marked down, avoid using borrowed money to average down, and size any position so that a further decline would be painful but not damaging. For individual investors, the lesson from earlier tech busts is that a dip can keep dipping, and patience often matters more than trying to catch the bottom.