Successful investors pay attention to the world around them. By observing world events, investors can identify trends in numerous markets. Every investor wants to discover the next Microsoft or Amazon. However, investors often limit their research to information published in Forbes or the Wall Street Journal. Unfortunately, stock decisions based on this public knowledge rarely result in impressive returns.
According to Paul Mampilly, a reputable investor and finance professional, people need to interact with the world around them to make sound investment decisions. Investors should learn about the relationships between resource shortages and natural disasters. Investors can also benefit from understanding how politics affect industries. For example, companies that rely on military contracts become more profitable when foreign policy hardliners are elected to public offices. Investors can also pay attention to political turmoil in emerging markets. With this knowledge, investors may be able to short-sell the stocks of certain companies.
While investors can short the markets and earn short-run returns by responding to patterns, they should also pay attention to the rising stars in various companies. Investors can earn massive returns by investing in emerging companies. People with a large amount of investment funds can consider venture capital investing. However, most investors do not have the funds for these investments. Instead, they wait for IPOs to buy public stocks. Young stocks typically have low prices, so investors can purchase shares without using many financial resources. If the company disrupts the market with an innovative product, its stock value will rise rapidly. This presents investors with an opportunity to earn extremely high returns. For example, a Blue Apron share cost about $5 in August. Investors can easily buy a large number of Blue Apron shares at this price. If the shares rise to $50, investors will earn large returns. This is an ideal investment scenario.
Detect Potential Market Disruptions
To maximize returns, investors should use their time and resources to detect potential market disruptions in various industries. A market disruption occurs when a company introduces the world to a new product that replaces goods that were in the same category. The automobile is a classic example of a disruptive productive. The automobile replaced horse-drawn carriages, and it changed the structure of numerous industries. Due to automobile production, many jobs were created in the rubber and steel industries. However, some people also lost jobs. Farriers were replaced by mechanics.
Many economists believe that market disruptions cause economic progress. According to the great economist Joseph Alois Schumpter, market disruptions are caused by innovation. Intelligent entrepreneurs can change the world by creating new ways of accomplishing daily tasks. From travel to product assembly, many tasks can be handled by groundbreaking technologies. These market disrupting products alter the preferences and expectations of people across the globe. Consider the example of the iPhone. Before the age of smartphones, people used computers to browse the Web. The smartphone gave people a wide range of technology applications. People can use the iPhone to listen to music, plot road trips, and surf the Internet. This innovative product eventually eliminated the demand for traditional mobile phones. Landlines have also become obsolete in many households across America. This example of market disruption demonstrates that new products can change the world.
By investing in startups, investors may be able to secure shares from the next disruptive company. This can result in extremely high returns. Investors should also heed the risks of the stock market. In addition to startups, people should invest in diversified mutual funds and ETFs.
Count on Technology
Some people believe that the stock market has a speculative technology bubble. These individuals may be correct, but investors should still pay attention to the rising stars in the market. The companies of Elon Musk should be on every investor’s radar.
Elon Musk’s most famous company is Tesla. Tesla is a company that creates electric cars. The company’s engineers are also attempting to revolutionize the world with autonomous vehicles. Elon Musk envisions cities where people do not own vehicles. Instead, a fleet of autonomous vehicles roams the city streets. When a person needs to travel to a destination, they use a transponder to hail a vehicle from the fleet. In addition to the programs for these vehicles, Tesla aims to improve battery technologies. Investors should expect Tesla’s stock prices to rise after the release of the Model 3.
Elon Musk also owns SpaceX, a private space firm. This company competes with Blue Horizon, Boeing, and other space technology corporations. SpaceX has already perfected reusable rockets and remote drone landings, so humans may soon be able to travel to planets in the solar system. SpaceX is not a public company, but investors should stay alert. An IPO may be on the horizon.
Investors should also prepare for the age of automation. As machine learning methods improve, repetitive and predictable tasks will be replaced by robots. Investors can discover companies that specialize in Python-based applications. Some of these companies may disrupt the market with artificial intelligence products.
Biotechnology is also a popular area for forward-looking investors. Investors can profit from the innovations of large firms like Biogen. Some futurists expect biotechnology companies to use augmented reality applications. If these innovations increase the profits of the biotech companies, investors may find new opportunities to earn returns.
About Paul Mampilly
Paul Mampilly is a skilled finance professional who was educated at Fordham University in New York. Mampilly is the editor of several publications that provide average Americans with investment advice. He specializes in growth investing and technology.