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Market Update

How to Invest in Disruptive Technology Stocks

This type of investing is not for the faint of heart, but we still see value in several of these companies.

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From the eye-popping returns of ARK Innovation ETF (ARKK) to the big-data innovations of Palantir (PLTR), investing in disruptive technology has been one of the hottest market trends of the past year. While many disruptive technology stocks still provide significant upside for investors, many have run too far, too fast as investors have overextrapolated growth expectations. For a primer on the topic, read "Are Disruptive Technologies the Next Dot-Com Bubble?"

Investing in this space exposes investors to a high degree of risk and potentially elevated volatility, but also offers the potential to generate far higher-than-average returns. As such, it has a place in investor portfolios but only as an allocation in an already well-diversified portfolio.

David Sekera does not own (actual or beneficial) shares in any of the securities mentioned above. Find out about Morningstar’s editorial policies.