Are you prepared to tech the risks?

Byline: TONY HAZELL

SAVERS are being swept up in a technology gold-rush seemingly unaware of the massive risk they are taking with their money. New internet millionaires appear on our TV screens and in the papers every week.

Small savers are piling into internet shares and technology-based investment funds under the impression that they offer a one-way ticket to riches.

At least [pounds sterling]2 billion is expected to be invested in share-based individual savings accounts (Isas) over the next six weeks and a large proportion is heading for technology funds.

Now financial advisers selling share-based Isas are becoming concerned that savers often seem oblivious to the huge risk these funds carry.

Jason Hollands, of independent financial adviser (IFA) Best Investment, says: 'Eight out of ten callers want tech-

nology funds. The typical caller is someone in their 50s or 60s who wants to invest in technology because they have heard it's a safe bet.

'Often these people have no idea of the risk they are taking which is completely inappropriate for someone close to retirement.

'Many people fail to realise that if they use a straightforward UK growth fund, a good proportion will be going into technology. They need to ask whether they want all of their money in just one high-risk sector.' Peter Hargreaves, of independent adviser Hargreaves Lansdown, says: 'Technology is first, second and third.

I believe tech stocks are overvalued.

They might be right over the long-term but there will be winners and losers.' Hargreaves Lansdown is taking [pounds sterling]500,000 a day into Jupiter's new technology fund.

Investments into this and the well-established Aberdeen Technology fund dwarf all others.

The advisers stress that although technology should prove a good long-term investment people should be investing only if they can afford to ride some fairly dramatic rises and falls.

Ian Millward, of IFA Chase de Vere, says: 'If you buy a tech fund you have got to view it as a long-term investment and be prepared to see some big ups and downs. When stocks have gone up 200pc in a year there is a danger of big falls.' Most concern is building up around small investors who are buying into single shares in the hope of making mega profits.

It's easy to see why the advisers are worried. Take the case of Orchard Furniture. It's a shell company, meaning it has been set up with next to no assets and intends to buy into other companies when the opportunities arise. Currently it has assets of about [pounds sterling]1million, but its stock market valuation is [pounds sterling]30 million. This is a massive gap to plug.

Traditionally, companies' share prices run at about 15 to 20 times their annual earnings.

If investors are very optimistic about their future potential profits, the share price might rise to 30 times current earnings.

But some technology company shares are now trading at up to 200 times their annual earnings - and most internet companies have never made a profit.

The track record of every innovation is that it becomes cheaper and profit margins are squeezed. Think of how much computer, mobile phone, television or video you got for your money ten years ago and compare it with now.

There also tends to be a spate of new companies seeking to exploit the technology.

Most fail, resulting in losses for their investors.

Mr Hollands says: 'Part of the difficulty is that people will invest only in the funds that are top of the performance tables.

'Last year we were trying to sell technology and Japan and most people didn't want to know. This year I think Europe and even the FTSE 100 would be a far safer option than technology.' The difficulty for advisers is that no one knows precisely how long the technology bull run will last. It could still be going in a year or 15 months or it could all collapse next month.

IFAs recommend that savers who want technology stick with established funds with a

good track record. Mr Millward's favourite tech funds are Fram-lington NetNet, Henderson Global Technology and SocGen Technology.

Another name which crops up regularly is Aberdeen Technology.

These funds all have experienced fund managers with a proven track record - though even these could have dramatic ups and downs.

The best of these funds are investing in businesses which stand to benefit from technological advances and better business-to-business communication rather than hollow internet companies.

The message from advisers is clear. Before heading for technology consider how much risk you are prepared to take. And unless you're an expert, steer clear of investing in individual internet shares.

Because there's a real danger that sooner or later people will notice the Emperor isn't wearing any clothes.