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An Ever Changing Investment World

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I saw a (now) humorous video from The Today Show dated January 1994.

Quite funny now, but back then a serious topic.

It is a great lesson on how the investment world is constantly changing.

What was a relatively unknown concept 17 years ago is now commonplace.

First the video, then a few examples:

The Today Show was a major morning show on NBC back in 1994. It was not your local community access station. Yet the knowledge level about the internet was negligible.

Technology like Facebook, Twitter, and iPads was not even imagined by (almost) anyone.

A mere 17 years later, the internet and email are taken for granted.

Investing Tip #1

When investing, look to the future, not just a company’s past results.

The future will determine where money will be made in the stock market.

Consider the following:

Apple began trading on September 7, 1984. It closed the first day at an adjusted (for stock splits, etc.) price of USD 3.02. On January 31, 1994, around the time of the above video, Apple closed at an adjusted price of USD 7.98. On January 31, 2011, Apple closed at USD 339.32.

Microsoft began trading on March 13, 1986. It closed the first day at an adjusted price of USD 0.08. On January 31, 1994, Microsoft closed at an adjusted price of USD 2.13. On January 31, 2011, Microsoft closed at USD 27.73.

Yahoo only came into existence in early 1994. It began trading on April 12, 1996 and closed the day at an adjusted price of USD 1.38. On January 31, 2011, Yahoo closed at USD 16.12.

Google did not start trading until August 19, 2004. It closed the day at USD 100.34. On January 31, 2011, Google closed at USD 600.36.

Even with many of these examples suffering during the crash of the dot.coms in the early 200s, the overall returns are strong.

Investing Tip #2

And it is not simply technology firms. Companies that utilize the technology also will flourish.

As an investor, there is money to be made on secondary companies.

Look at the Apple App Store. It began operating on July 11, 2008 with 500 available apps. In less than 3 years, over 400,000 apps are now available. And on January 22, 2011, 10 billion apps had been downloaded. Probably a few of those by Katie Couric and Bryant Gumbel.

Some app developers have made good money from their association with Apple’s technology.

Or consider Amazon. It began trading on May 16, 1997. It closed its first day at USD 1.73 on an adjusted basis. On January 31, 2011, Amazon closed at USD 169.64.

Lucrative returns can be made investing in next generation technology and the businesses that utilize the technology.

Investing Tip #3

Of course, new technology alone does guarantee success.

The lessons learned from the rise and crash of the dot.coms serve as proof positive.

For every Amazon, Yahoo, or Apple that prospered, there are also many companies like Webvan [4], Think Tools [5], and InfoSpace [6].

When investing, look to the future.

What are the unknown technologies today that will be common in 10-15 years?

If you can figure it out, you have a chance to find the next Amazon.

But do your due diligence. You need to try and separate the wheat from the chaff.

A little luck will not hurt either.

Then perhaps your future Amazon will not turn out to be another Webvan.