For the first-time investor, the stock market looks like the Wild West or the jungle. There’s a lot of chaos and no one seems to be working together. This is a misconception that perhaps will never die. It’s more like a mutual habitation of different kinds of people with different ambitions but all using the same tools to get there. It’s understandable if it’s daunting to you at first but there are things you can do to make it easier. First of all, put your money back in your wallet, and sit down. Watch what’s going on in the market and try to understand why. There is always a why no matter how complex and random certain things can seem. Better yet, you should watch an industry and see what is going on that is making people interested in investing in certain companies or several businesses at once. For example, had you been one of the people that were watching what Apple had created back in 2007, you would have not just invested in the company but also in the other mobile phone companies. Sooner or later, this trend of a large touchscreen smartphone was going to explode. So use your hawkeye to spot similar actions in a particular industry.
Waiting for the boom
As aforementioned the tech industry was suddenly the most lucrative to invest in when smartphones came into being. It wasn’t precious metals, it wasn’t banking, it certainly wasn’t real estate, but mobile technology. This is what’s called an industry boom. It’s clear to see why as billions and billions were invested in companies like Samsung, Apple, HTC, Blackberry and Nokia. Now again, the questions on everyone’s lips is ‘what’s the next industry to boom?’ There are many articles being written about this subject and you should do your best to read through as many as you can. You’ll notice a trend that keeps cropping up over and over in 2018 and for 2019. The ecommerce world is taking off and continues to innovate in ways that no one can truly predict. Virtual reality is another that is beginning to rumble and show signs of skyrocketing because it can be used in video gaming, movies and even for real estate.
Choosing an index
If you’re confident in a certain industry then you may want to begin investing in indices. These can be mutual funds run by investment firms or it could be a company that purely handles index funds. This is when you either invest in a portfolio in multiple or a single index. In this index there will be many businesses that can be in the same industry or in a mix of industries. Using stock investing apps such as M1, Robinhood and or Acorns it’s up to you whether you wish to purely invest in one industry and indexes of that industry or in a variety index that has different businesses in different industries that could be affected by the supposed boom.
Much like in Chess, sometimes doing nothing and just watching what will happen on the board may give you the best shot at making the best move. Investing in an industry that you suspect will boom takes a lot of research and know-how but the returns could potentially be huge.
MR LEE FRASER