Initially, the process of investing in stocks can seem a bit overwhelming, especially if you happen to be an inexperienced investor. Surprisingly, it’s not as complicated as it seems. Whether you’re new to the stock market or simply looking for a way to reinvest your money, investing in stocks is about learning and taking chances.
The key to making a good investment is to make small investments in stocks, which have been proven to do well and to pay close attention to stocks because each and every subtlety counts. You should invest in areas that have been historically proven to excel, such as pharmaceuticals, real estate, and tech industries.
TSE: AC or Air Canada is an airline that provides diametric and international flights, which operates a fleet of 184 aircraft. In regards to investing, Air Canada is a 1000% winner, which has an average value of 5.31 million shares and a $4.64 billion capitalization value.
Now is the best time to buy TSE: AC stocks. These stocks have recently seen a 25% dip in the market due to the coronavirus sell-off. Apart from TSE: AC, there are dozens of technical stocks worth investing in.
While there are many seasoned investors, such as Warren Buffet, who largely avoid investing in tech stocks, others see them as great long-term investments. Many have doubled and seen a 65% gain in the past decade.
Below, I’ll explain the benefits and importance of investing in technology stocks, along with a few words of advice.
Many investors tend to believe technology companies are difficult to understand, especially to regular, less-seasoned investors. Surprisingly, most tech companies have simple and easy to understand business models.
The term “market disruption” may seem chaotic, but tech companies thrive on market disruption, which often fuels their dominance. Amazon, for example, which started off as an e-commerce company, eventually expanded into other markets, such as streaming services and retail apparel, which disrupted other markets and fueled their overall growth.
Facebook, for example, nearly all of their revenue revolves around advertising, which makes up 97% of their revenue. Each quarter, Facebook reduces its ad-space, which increases its demand and boosts prices. Twitter and Instagram have similar business models which are simple and easy to understand.
As I mentioned above, technology companies often excel by disrupting other markets. Rapid expansion can help increase market share and rival the competition, which leads to prolonged growth.
Oftentimes, tech companies continue to evolve, which will shift their focus on dividends and buybacks. Once this happens, returns then become more predictable, while volatility begins to wane. After volatility fades, as will the stock’s growth, this is why it’s always better to invest in stocks while the company is fresh and unpredictable.
Ability to Outperform Other Stocks
When it comes to investing in stocks, liquidity is everything. If liquidity is improving, technology stocks are more likely to outperform other stocks. When a company’s liquidity begins to rise, your stocks will likely see an increase in their performance.
Easy Returns and Quick Cash
Although at first glance technology stocks may seem expensive, the sector trades at 22 times its annual earnings, which makes it a worthwhile investment. In comparison to the rest of the market, the tech sector is trading at a 22% premium, which is something investors haven’t witnessed in nearly a decade. The technology sector roughly offers a 35% return on equity, which makes it exceptionally profitable. Most investors will see a cash return within ten years.
Before You Invest, Do Plenty of Research
When it comes to playing the stock market, you should always look before you leap. Although investing in tech stocks may initially seem like an easy investment, you should do plenty of research and heed the advice of seasoned investors. A tech company is only profitable if there is a profit to be made.
There are hundreds of tech companies that may initially seem profitable but have yet to make any money. You first must understand how a technology-based company makes money and take into consideration their competitors and if the company has any unpaid debts. If the company you’re considering investing in faces a lot of competition, you’re better off avoiding it entirely.