What to Read Before You Invest
These were the secrets that started it all…
Technology is taking over the business world. When companies don’t adapt, they fall behind. This is why tech stocks are a great place to invest. Many of the world’s top companies are tech giants… but there’s still plenty of money to be made.
Technology is saving and improving the lives of billions of people. The rate of change is picking up steam. And it’s presenting a great growth-investing opportunity.
Discovering fire helped us explore and live in new parts of the world. Flames fended off savage animals. And fire killed parasites in food. As a result, life expectancy surged.
The invention of fire pushed mankind into a new age… but it was slow-moving. It took thousands of years to harness fire throughout the world. However, great inventions have since spread much faster.
The radio took roughly 31 years for mass adoption… Television took 26 years… Personal computers took 16 years… And mobile phones took only 13 years. World-changing technologies spread like wildfire today. And this growth in tech is helping both inventors – and investors – build fortunes.
It used to take generations to amass a fortune. It took John D. Rockefeller a lifetime to build his oil empire. But new technologies today forge billionaires seemingly overnight.
Developers in their garages – or dorm rooms – can now create software that leads to billion-dollar companies. For example, Mark Zuckerberg founded Facebook in 2004. Then in 2012, it went public with a peak valuation at $104 billion. And since its IPO (and name change to Meta), the market cap has climbed above $500 billion.
In recent years, Meta has gobbled up other younger companies for billions. It acquired Instagram when it was less than 3 years old for $1 billion and Oculus for $2.3 billion when it was less than 2 years old.
There’s big opportunity – and money – in early-stage investing and public tech stocks. They’re moving fast. And these days, anyone can get in on the action.
The first few U.S. publicly traded companies to reach the $1 trillion were all tech stocks. Apple won the trillion-dollar race and was followed by Amazon and Microsoft. The list below shows 10 of the top tech companies:
Many of these tech stocks are household names. They give investors broad exposure to the tech industry. But there are also many smaller opportunities. You can find more tech stocks to watch here.
Technology is widespread, so it can help to break the industry into categories. This can improve your investing strategy. Here are three categories for tech stocks…
Software is a high-margin business. A small team of developers can impact scores of businesses around the world. And one well-designed program can reach millions of users. This lowers overhead costs and lets tech companies – and investors – keep more of their revenue.
For example, Google had 98,771 employees at the end of 2018. The company brought in about $137 billion in sales for the year. That works out to more than $1 million per employee. And after expenses, total net income was just over $30 billion, resulting in a 22% income margin.
On the other hand, Walmart (NYSE: WMT) had more than 2 million employees in 2018 and brought in $500 billion in revenue. That works out to $227,427 per employee. And after expenses, total net income hit almost $10 billion, resulting in a 2% income margin. That’s much lower than that of Google and other software companies.
Hardware usually doesn’t have as high of a profit margin. But it can provide a strong moat. Big tech companies build ecosystems that keep users in their suite of products. Apple is a prime example. You’ll find many Apple fans who have an iPhone, MacBook and iPad.
Hardware companies can also legally protect their innovation. It further fends off competition. For example, IBM (NYSE: IBM) is a patent leader in many areas of the technology world. For instance, the company earned 8,088 U.S. patents in 2016 alone. And in 2021, the company superseded that record with 8,682.
Companies can build and sell products around their patents… or license them out to lower overhead expenses. It’s a powerful way to generate income.
People who control the most data – and know how to analyze it – can make the best decisions. That’s why data analysts are paid the big bucks. And we’re collecting more data than ever before.
As a result, infotech and analytics companies are a great place to invest. Many companies are bulking up their infotech capabilities to improve decision making. The increase in information is leading to a lot of opportunities. For example, cybersecurity is great for growth investors.
The dot-com bubble left a sour taste in the mouths of many tech investors. But they were too optimistic on the technology timeline. There’s since been a big, healthy rebound. Some publicly traded tech companies have reached the $1 trillion mark, and many more will follow.
Tech stocks will continue to take over more of the market and investors’ portfolios. The new innovation is improving all of our lives. The internet of things, blockchain, driverless cars and many other technologies are pushing us into a new age.
Read Next: Top 5G Tech Stocks to Watch
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These were the secrets that started it all…
Investors with a low budget can use risk tolerance to inform their investing strategy.