You’ve Already Missed the Next Big Thing

Posted on 17. Dec, 2005 by in News

I read an interesting article on Fool.com today on “The Next Big Thing in Investing.” The author, Mathew Emmert, makes an interesting yet obvious statement that too many investors today are searching for the “Holy Grail” of investing – the next Google, Microsoft, Yahoo, Cisco, etc. Yet what many people don’t realize – except perhaps my entrepreneur friends – is that Google is just one success story out of thousands of failures. And each of those failures had money invested into it that came from investors hoping it would turn out to be the next Microsoft. However, as Mathew points out, the next Microsoft is probably… Microsoft. It’s going to be difficult to tackle a giant like Microsoft even in the next 5-10 years! They’ve got intelligent people, some great products (notice I said some), capital, cash, a huge R&D budget, and the drive to stay competitive. Instead of betting on the “next big thing” Mathew suggests putting your money in the tried and true.

The point is that you can dramatically reduce your risk and most likely enjoy better results by choosing high-quality, dividend-paying companies with which you’re already familiar. Putting your research efforts into buying those businesses at great prices will likely generate far superior returns than trying to unearth the company that will cure cancer.

This doesn’t mean that every company that you invest in should be household names but it does mean that you might want to think about in investing in companies that are solid players and will most likely earn you a solid return – not only in the actual stock price but through dividends as well. As always, however, diversify your portfolio in order to avoid huge losses.

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