AAPL
For a retirement fund, I still think tech gives the best 50 year returns, as a sector.
Why's that?
Take a mature industry - what are the sources of potential upside?
Growth, more customers, perhaps from new geographies/product categories
Efficiency improvements and thence profitability
Occasionally new product innovation.
Being a mature industry though, the chance of a break out innovation, that changes the face of the industry, is low. So your growth path for the industry tends to be tied to GDP growth in the end.
With tech though, you can have a revolutionary product, which doesn't do it by redistributing power, but by increasing the share of the pie for everyone.
And while doing this, tech still keeps the possibility of growth through diversification/geographical expansion AND efficiency improvements which will be discovered over time.
Sorry I am a bit tired, so I may not have made the most educational of responses.
Aviation is kind of the diametric opposite of this -- heavily regulated, capital intensive, and exposed to commodities and union labor.
I don't invest exclusively in tech, but I understand tech better than most other sectors, so I feel more comfortable with individual stock picking. I do index funds in most other segments (with the exception of oil, which I also understand, and transport/logistics). I do index funds for S&P 500, international, MCSI 3000, and specific other sectors.
It is a fair question to bring up.
How does back-testing tech as a sector work out over the past 40 years or so?
From everything I've seen, beta for tech stocks has been positive for basically all of the past 40 years, and S&P has been up by a lot, so yes, tech stocks did well. That doesn't really say it did better than other sectors individually, but better than average.
Plus railways are cap intensive as well - tech investment comparatively is far lower, with a greater pay off.
I think that tech is certainly a growth sector, but does that translate into buying into stocks in the whole sector and coming out ahead? There is some pretty vicious competition, no? DEC, SGI, Yahoo, Altavista, Wang Laboratories, Commodore International... the list of companies that once flew high and then tanked is fairly long.
That said I had similar misgiving about the original: " invest in tech" thesis. In theory I see the merit, but what is the practical implementation?
Maybe he could use an indexed fund or another instrument which matches a composite of stocks focused on tech.
To an extent, the current share price will be factoring in future growth on the same trajectory as we've observed over the last few years.
E: I'd like to clarify I'm including stuff like no USB ports in walled garden.
I think people have accepted the walled garden model and they like it.
In a perverse way, their success is partly because of the PC era itself. The lowered expectations people have of computational devices from windows makes. Having something that "Just works" such a blessing, for such a ridiculous portion of all consumers, that their "walled garden" translates into "sanctuary" for most human beings.
IF in the future mature market, other tablets have also reached a stage where "it just works", then its an even playing field.
At that point,the walled garden will be just another field to walk between.
Edited for clarity
It's not the same for, say Amazon. They'll need to earn 5x more to get back in the "standard zone". So investors seem to think Amazon still has a huge growth forward.
If that's worrying, you can find "equal weighted" funds, that use the same funds as the index but weight everything equally -- essentially betting against AAPL and XOM in favor of slightly smaller companies. I offer no opinion as to whether that's a good idea or not.