According to Alexander Green, the Chief Investment Strategist for Investment U, “Investing today is not for the faint of heart. Finding the right stock as never been harder, much less getting truly helpful stock market investment advice.” It seems like in today’s society a lot of individuals are investing in the stock market ranging from the professional who has made trading his or her career, to the average Joe who sits at home and gets a thrill out of the game of stock investing.
Keep in mind that an individual can gain great rewards from investing in the stock market, however, that same individual can also experience great losses as well. As a means of investment, it is important to understand that the stock market is risky by nature.
So the question becomes, how does an individual pick out the right stock in order to hopefully secure the most gain? Martin D. Weiss suggests the answer is to have some broad based hedges, as well as only buying the highest quality stocks that have the ability to perform in both good and bad times. One way an individual can pick a high quality stock is from the Weiss Ratings scale. The company, created by Martin D. Weiss took all the stocks in the United States back in 2001 and gave them an initial rating. They then tracked those stocks for the following 10 years in order to give consumers an accurate rating for each particular stock. Therefore, anything today that is rated “A” on this scale is definitely something that can be trusted. But what about tech and internet companies in the stock market? How do they tend to fair in comparison? Back in October of 2010, James K. Glassman who is a contributor to Kiplinger said, “web stocks can be fun, but risky investments. Look for companies with big ideas and plenty of cash.” Take the company Netflix for instance. In 2002 Glassman mentioned he purchased some of their stock for a mere $15 per share. The very next year, in 2003 the shares were now at a price of $60 each. Glassman was shocked his profit had increased three-fold and sold. However, if he had kept holding on, his shares would rise again to see $118 per share in 2009.
So although stocks can be risky and volatile, Glassman has some tips that individuals should take into consideration if they are interested in internet stocks. First of all, he says to invest in companies that have a great idea. Don’t look so much at the stock price, but look at the company’s idea. Netflix had a great idea of renting movies out to individuals to keep as long as they wanted, then return for a new one. Now they are even streamed online! A great idea can make or break a business.
The next tip Glassman mentions is to watch out for the competition. Going back to the Netflix example, the company had the advantage because they didn’t have to build a lot of store fronts to compete with other video stores such as Blockbuster since they were online. Look out for companies to invest in that have some protection against competitors in this regard.
Next, Glassman talks about the importance of diversifying your internet stocks. Some of his personal recommendations include: Google, Amazon, Blue Nile, LoopNet, The Knot and Earthlink. Since it is so risky to invest in internet stocks, keep in mind that three out of four internet stocks might fail. But the one that succeeds, might succeed really well and make up for it. So the more diversified you are the better outcome you can expect.
Finally, like any professional, Glassman warns against giving up too soon. His experience with Netflix taught him to hold instead of trade. Take time to wait awhile and see what happens with the stock. Although things might look gloomy for a while. You never know, it could come around and the payout could end up being greater than you ever imagined! Keep some of these ideas and tips in mind when you consider investing in the stock market, especially if you are investing in internet or tech stock.
