You don’t have to own the company to capitalize on its gains
One of the most frustrating things about investing relates to missing out on a viable opportunity to buy a particular stock. Think Apple, Google, and Microsoft and how their valuation have soared since their initial public offerings to the point that they are out of reach for many investors.
Long-term investors understand that if they had got in on these particular growth stocks years ago, they would be enjoying some pretty nice returns.
But what about those who didn’t have the wherewithal, or means, to buy into such opportunities? Must they now just sit back and declare it’s too late?
The answer is no; there are alternatives. In this piece, we’ll discuss how you can enjoy the residual effects of major companies’ upward stock moves without having to buy that company’s stock.
The weight of an Apple
Apple (NASDAQ: AAPL) is a Dow component stock, which means it carries a lot of weight on the Dow Industrial Average. Happenings like when it has a product launch event can move its stock higher, or lower. Not only can this propel the market higher, or drag it down, it can also affect the prices of the companies it does business with directly.
For this reason, you should consider companies, like suppliers, to invest in if you can’t justify buying Apple at it´s current valuation, or just don’t want to own a company like Apple directly. In the case of Apple, its suppliers, especially chip makers, see a boost in their stock prices on news that Apple foresees a greater demand in its products, such as the iPhone.
What’s in the budget?
When government budgets are assembled, focus is on which areas are in need of the most funding. For example, an increase in defense spending could be called for. On hearing this, consider the defense space and what companies stand to benefit the most. Missile and military aircraft manufacturers, as well as others whose offerings are in line with this budget need should be considered.
This is where ETFs could be a good idea because they hold a basket of securities that can be filled to address specific industries, like defense.
You may have heard about the rage over cryptocurrencies like Bitcoin. These are extremely volatile and risky investments that many advise to steer clear of. But what if you could invest in this high risk, high return phenomenon without losing your shirt, or your mind?
You can, and that can be done by investing in the companies that are helping this industry grow. For example, without getting too technical, creating Bitcoins requires a process called mining that relies on computer graphic cards. The top makers of these cards are Advanced Micro Devices (NASDAQ: AMD) and Nvidia (NASDAQ: NVDA).
In addition to making these cards that can be used in the risky, niche Bitcoin space, these companies’ offerings can be used by a multitude of other companies in various industries. That means any loss of Bitcoin-related customers are mitigated by the presence of customers in many other industries.
You may not be able to justify buying Apple, or a similarly high performing stock, or maybe you don’t want to buy the stock, but that doesn’t mean you can’t capitalize on their gains. Investing in a supplier, or other entity that benefits from the company, could be a winner for you. The same is the case for spaces and industries that are on the cusp of seeing their products having increased demand.
Take the time to study the interrelations companies have with larger companies, or within their industries. You will find that there are long-term investment opportunities that exist that won’t cause you to increase your risks, but could increase your gains.