Machines can be dangerous

Fools rush into technology stocks but others make sure they appreciate the risks, says Ken Welsby. And for those in the know, the future can be golden

Say "investing in technology" to the average stockbroker and he will take half a step backwards, make the kind of gestures that signify warding off evil spirits and look at you with an expression that suggests you might not really be such a sensible client after all. Technology has a poor reputation among investors; deservedly so, say those who have lost their shirts over the years on a series of roller-coaster rides - of which the latest example is Pace, the maker of satellite receivers and modems which has seen its share price slump from a high of 242 to 90 yesterday and which has now parted company with both its founders.

Similarly, investors in Internet stocks have seen prices soar in the days and weeks from their debut - only to land with a crash when the companies concerned fail to deliver the goods. Or, worse still, find themselves out-manoeuvred by the competition before their product has even been delivered.

But say "investing in technology" to Brian Ashford-Russell at Henderson Investors and he will take you on a tour of what makes today's world work.

"Just think about the changes in your work-place, the improvements in your home, developments in the media, the breakthroughs in surgery and medicine and you soon begin to appreciate the surge in technology," he says.

"Twenty per cent of the world's stock markets are now represented by technology-based companies - and they are now worth twice the total value of the UK stock-market, a fact which should be reflected in your portfolio."

It is safe to assume that Mr Ashford-Russell knows what he is talking about. He is the head of technology at Henderson Investors, and runs one of Britain's stellar investment trusts, TR Technology. If you had put pounds 100 in this fund in March 1992, your investment would today be worth pounds 1,092.40. It is one of a stable of technology funds which have produced returns over the past decade of between 14 and 26 per cent a year - which is way ahead of the stock market indices and the funds that track them.

TR Technology is being wound up in April 1998, but its successor, the Henderson Technology Trust, is already in place. Like its predecessor, it is an investment trust, aiming for long-term capital growth, rather than income. Like all investment trusts it is a plc company quoted on the stock market in which you invest by buying shares. Given the nature of the fund it is hardly surprising that its assets are heavily weighted towards the US, which unfortunately means that you cannot hold it in a PEP.

Although many market professionals are wary of technology stocks, such companies do have a following among private investors - mainly those with a scientific or technical background who believe that they can make judgements on their market potential.

In the US, thousands of engineers, scientists and business people regularly invest in "tech stocks" such as Netscape which are listed on the Nasdaq market. Prices are shown live on the "ticker" which scrolls across the screen on business channels such as CNBC.

This service is now available in the UK, prompting some eager investors to take the plunge for themselves. But Dr Geoff Dickson, a management consultant in Scotland's "Silicon Glen", says that his experience serves as a warning to anyone thinking that backing "tech stocks" is simple.

"My wife and I were active investors when we lived and worked in the US - and we made good money on Nasdaq for several years. But the market is much more volatile - and last year we ended up pounds 20,000 down. The lesson is that if you aren't close to it, you're unlikely to do well"n