Time to invest in tech?

February 17, 2000: 2:57 p.m. ET

Investors should choose a strategy that yields the highest probability of success

NEW YORK (CNNfn) - In the stock market, timing is everything. Is now a good time to snap up tech-heavy mutual funds or should investors wait for the record-setting Nasdaq to settle back down?

In response to a reader's question, Frank Armstrong, president of Managed Account Services in Miami, suggests investors may want to take the wait-and-see approach.

Ask the experts a question.

I'd like to add a mutual fund that invests in technology to my IRA, but I don't know if I should invest while the Nasdaq is at record highs. Should I wait for a correction?

You have neatly defined the traditional market timing dilemma. We all know that tech stocks are selling at prices never before seen. We have to wonder if even the great companies might not be priced a little high relative to their fundamental values. But, we can all imagine at least three possible scenarios:

1. Tech stocks continue to soar for the rest of our lives. (Highly unlikely--at least it has never happened before.)

2. Tech stocks stagnate until their values catch up with market prices.

3. Tech stocks get strongly corrected.

No one knows for certain which outcome will occur, or what the timing might be. (Believe me, if I knew I wouldn't tell you. I'd buy a few options and sail away.)

At heart, I believe that the appropriate investment policy is the one with the highest probability of a successful outcome. I'm not interested in the highest possible rate of return regardless of risk. Buying a sector or asset class when it is at an all time high and after one of the biggest run-ups in history doesn't fit with my investment philosophy.

There isn't any evidence that sector rotation or market timing does anything but increase risk for investors. If Jeff Vinick (lately of Magellan Fund) can't decide when to buy and sell tech stocks with all the resources of Fidelity behind him, what hope is there for you and me?

While I don't deny that tech stocks have a place in every portfolio, I am content to own them as part of a broadly diversified index like the S&P 500 or Russell 2000. That way I have representation in the sector without being overweighted.

In the end, each investor must make his own informed decisions and then live with the consequences. I hope I have been able to give you some thoughts that will help you make a good choice.