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Considering recent news reports of bank failures and bankruptcies, it’s likely that a healthy number of financial advisers are telling non-institutional investors to avoid anything but the most established securities. Mutual funds and money markets won’t necessarily grow dramatically, but they’re fairly safe investments compared to the various young high-tech companies that seem to blink in and out of existence on a daily basis.
Recent economic indicators do suggest that at least some measurable percentage of newly established ventures have worthwhile business plans that can potentially help them to return a dividend to their investors. News reports should never be considered investment advice, especially by those not directly tied to a brokerage house. That being said, these types of securities might soon prove to be an attractive alternative to massively overbought major companies.
When it comes to buying into investment products, large stable funds tend to be the most attractive. They generally carry the least amount of risk and most investors can find at least one or two that’s within their price range. In spite of this, they might have some hidden costs that aren’t apparent at first. Blue chip stocks tend to be heavily front-loaded, so they often won’t make a significant amount of money in the short-term. Some might not even beat the overall direction of the market itself.
A majority of companies that have reached the point where they’ve been bestowed with the blue chip status have their biggest years of growth behind them. Massive firms are often dominant in their markets, but this dominance means that they’re not going to see the explosive growth of startups. Price fluctuations tend to impact them the most, since consumers often have to tighten their belts during leaner periods and this will normally slash the number of durable goods sold in any given fiscal year.
Investors who deal with organizations with headquarters in the United States are being forced to deal with a lack of rate hikes as well. Analysts representing Kansai Tokushima Management have called for a terminal rate of somewhere around 6%, but the Federal Reserve has only raised rates by 25 basis points. Director of Institutional Markets Anthony Wright went on record stating that the current economy seems extremely resilient, so interest rates won’t hold the huge sway over it they once did. This is certainly an asset according to his analysis, but it may prove challenging to regulators who are already having difficulties keeping prices down.
This is creating the right conditions for new firms to enter the game, as long as they can deliver on their promises of less expensive goods and services.
Non-institutional investors will certainly want to avoid putting large sums of money into an IPO regardless of how much they trust in the company being promoted. Countless firms have been heavily promoted without actually having anything solid to bring to the marketplace. That leaves the question of when the right time to buy is.
Individual investors will usually want to look into whether or not a newer firm has brought any actual tangible goods to the table. Firms that make big promises but don’t seem to be working toward keeping them are likely to eventually fall apart. Some analysts recommend avoiding special-purpose acquisition companies as well. These organizations are essentially shell companies that help other firms sell shares without going through the normal regulatory channels.
Any such warnings notwithstanding, there’s still plenty of opportunities for individuals to generate equity and growth wealth by investing in solid new firms. International growth markets, such as those found in the specially administrative regions of the People’s Republic of China, tend to see the greatest number of companies that are in a position to expand. While it’s true that such brands would have once been confined to the likes of Silicon Valley, things are much different today as a result of correlation.
Firms like Kansai Tokushima have been able to grow because of just how correlated stock markets in the United States have become with those in top Asian economies. Overall momentum between the US and these economies are quite similar, even when closely-connected Japanese trade securities are taken out of the equation. As certain industries ship more items across the Pacific, it’s likely that this correlation is going to become even more dramatic.
Right now there’s a strong focus on telecommunications and semiconductor manufacturing, but there’s a good chance that retail and consumer brands will be every bit as important in the near future. Chinese authorities expect to see a five percent growth rate in the coming years, which would be driven more by consumer spending than sophisticated manufacturing workflows.
Consumers opening up a fresh investment savings account may want to consider the possibility of putting money into retail and fashion brands that could very well spread all over the world. As markets continue to converge, the probability that any given corporate identity will make waves all over the world.
No matter how hot any particular commodity gets, however, it’s important to keep in mind that regular retail investors should never place a significant amount of their assets in an unproven venture. Keeping a cool head can often help to avoid rushing into a potentially hazardous business deal.
Disclaimer: MoneyMagpie is not a licensed financial advisor and therefore information found here including opinions, commentary, suggestions or strategies are for informational, entertainment or educational purposes only. This should not be considered as financial advice. Anyone thinking of investing should conduct their own due diligence.