Investing

What to Look for When Investing in Startups?

November 5, 2020 By Susan Paige Leave a Comment

When it comes to business, big things ultimately start from small beginnings. That delicate truth is why the first few years of business operations for a new startup are often a telling, reliable gauge of future prosperity.

About 20% of new startups will fail within the first 12-months of operations.

Depending on the statistics you prefer, anywhere from 75% to 90% of new startups fail within the first decade of operations.

Success, profitability, and long-term operational sustainability are hard-earned characteristics that are never gained easily for a 21st-century startup.

That is especially true now that the coronavirus pandemic has ravaged the global economic market.

It does not mean that the business world will end.

It means that aspiring investors must now be more savvy and discerning than ever before when making investment considerations.

There was over $1.6 billion in seed capital investments given to new startups in Q2 2019 alone. As long as there are businesses, there will be investors.

However, when it comes to crowdfunding, never leap before looking.

So, if you are an investor perusing your options, what should you look for when investing in startups?

Business Plan

Ask for a detailed and comprehensive business plan.

The startup you are considering for investment must be able to comprehensively explain their product or service, its place in the business market it will serve, and why the business market will pay attention.

Does the startup have a realistic advertising and marketing initiative that will help establish its brand?

It is not enough that the startup has faith in its product or service. What quantifiable business plan metrics can they provide to reassure you that your investment is warranted?

Understanding of Demographics

Startup success hinges on a lot more than just understanding their product or service. So, does the startup understand it’s projected consumer demographic?

Who is the consumer demographic targeted for advertising and marketing? Why will this demographic buy the product or service?

Also, why would this demographic buy the startup’s product or service instead of those already offered by established competitors?

How will the startup keep apprised of its consumer’s satisfaction, concerns, and feedback?

The startup should have data proving that it understands its own consumer demographic.

Presales

A promising startup will already have modest or impressive presales of its product or service.

Presales would also be a quantifiable testament of the startup’s understanding of its consumer demographic and target business market.

A Healthy Pool of Investors

How much seed money did the startup raise before attracting your interest? Is the startup actively crowdfunding?

Is the startup strategically and realistically trying to source business loans? Almost 49% of small banks will authorize a business loan compared to just 23% of the larger corporate banks.

If you are the first investor considering jumping in the investment pool, then it means that the startup is either still finding its way, unsure how to establish its brand, or just not ready for prime time yet.

Investigate a Startup Thoroughly Before Investing

There are many things you should look for when considering investing in a startup.

Is the startup willing to learn and course-correct from mistakes? Or is it too prideful and myopically stubborn in sticking to its business vision?

Furthermore, raising too much money too early could be just as much a curse as a boon. The startup may not have a business plan, enough staff, or facilities for a rapid expansion of operations.

Factors that you should consider before investing in a startup will depend on the startup and its marketplace readiness level.

Ask comprehensive questions, request data, and never leap before looking when investing.

For more great saving advice topics, read these:

The Benefits of Investing Using The Rule of 72

Ten Reasons To Consider Investing In Savings Bonds

Investing In Art and Antiques For Fun and Profit

Image source: Pexels.com

Best Ways to Invest After the Election

November 3, 2020 By Trey LaRocca Leave a Comment

The stock market has been an anomaly lately. With coronavirus, a volatile energy market, and worldwide business closures, there are many factors that sway the markets other than the election. With that said, the election is sure to have a massive effect on our investments. As we have seen the last four years, just a single Tweet from the president can make or break certain stocks for a time. As a result, you can be sure that the outcome of this election will make waves on Wall Street. So, how should we invest after the election?

Stay Your Hand

As far as Election Day is concerned, I would suggest you wait a little bit. While there may be a pretty convincing victor tonight, it looks like there will be substantial pushback no matter which way it goes. This means you may invest according to one outcome, just to have lengthy court cases or vote counting delays tank your investment. If there isn’t a convincing winner, there is even more reason not to pull the trigger. Uncertainty is not what you want to bank your future on.

Avoid Single-Stock Investing

This is pretty much par for the course when discussing any investing. Whether it is attached to the election or not, stock trading is best done through mutual funds or index funds. this diversification makes the investments safer long-term, and avoids one ruined stock taking your whole retirement down with it.

While some single stocks may skyrocket momentarily off the heels of this election, that growth may not be sustainable. Mutual funds and index funds, like the S&P 500, ensure that you can take advantage of the consistent growth of the entire market. With that said, there are certain industries that you may want to focus on depending on which candidate wins.

The Impact of Your Investment Strategy

If Biden Wins

Biden has pushed hard for massive government spending on green energy. While he may be slow to enact these plans, stocks in the green energy industries like solar and wind should respond well to a Biden victory. Not only that, but they are more likely to grow if a Biden administration subsidizes them.

Avoid fossil fuel stocks, as Biden has been remarkably inconsistent when it comes to fracking. He has an extensive history of claiming he will ban fracking (or phase it out) to serve the greater aim of complete eradication of fossil fuels. As a result, these stocks will probably not respond well to a Biden victory.

If Trump Wins

To start, take the Biden predictions and flip them around. Fossil fuel jobs have been a topic of note for Trump, and he has been aggressive about protecting those jobs. AS far as green energy goes, he hasn’t been outright hostile, but clearly does not seem to be looking to increase subsidies to their benefit.

Trump is more of an all-rounder play. Say what you want about Trump, but the market seems to love him. If Trump wins, hammer the S&P 500 or index funds like it, and hold. It seems like the entire market will grow faster under Trump, and there is no reason to take unnecessary risks while stimulus is still being negotiated, as that will likely have an even larger impact on Wall Street than the election will.

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Thinking of Investing in Snowflake? Read This First!

October 29, 2020 By Kathryn Vercillo Leave a Comment

You might not have heard of Snowflake until recently. After all, it’s a cloud data storage system. Unless that’s something you need for your business, you may not pay attention to it. But then, the Snowflake IPO happened. It was a historic moment; it’s the biggest software IPO to date. So, should you invest in Snowflake? Here are some important things to consider.

What is Snowflake Cloud Data Storage?

Snowflake is a cloud data storage system platform. As a result, it competes in the market with AWS (Amazon), Azure (Microsoft), and Google Cloud.

Basically, they offer cloud data storage for large companies. They’ve built their own unique cloud data storage architecture that scales well and requires very little maintenance. Big companies that want to make sure that their customers’ data is stored safely in the cloud are turning to Snowflake for solutions.

Over time, Snowflake has also grown to offer related services. If you’re interested in the details of all that Snowflake can do for enterprises, learn more here or on the Snowflake website.

Snowflake’s Impressive IPO

If, however, you’re less concerned about the details of the business and more concerned about whether or not this company is a good investment, then you might already know about the company’s impressive IPO. Snowflake hit the IPO market in mid-September to great attention.

Here’s a quick timeline of the cloud data storage business’s IPO experience:

At the beginning of that month, SNOW shares were expected to debut at ~ $80 per share.
The expectation increased to $100+ per share before the IPO.
The night of the IPO, SNOW shares launched at $120.
However, by the following day, shares had already doubled. They peaked at $300 per share that day.
The closing price landed at just over $25o per share.
The company’s valuation: $70 billion.

When all was said and done Snowflake sold 28 million shares. This resulted in an IPO exceeding $3 billion.

The previous record for software IPO sales was not-quite-$1-billion. That was from Dell’s IPO more than a decade ago. No wonder people are talking about whether or not to invest in Snowflake.

Snowflake Isn’t Yet Turning a Profit

Snowflake is a relatively small business. The company has just over 3000 customers. That doesn’t seem like many for a company that launched in 2012. However, it’s double the number of last year’s customers. Revenue has also doubled. That said, CNN reports that the company has posted a net loss of about $170 million this year, which is the same as last year’s losses.

But, Snowflake Cloud Data Storage Has Big Backers

Despite the fact that the company isn’t yet making a profit, it has some big backers that believe in its potential. Both Salesforce and Berkshire Hathaway (Warren Buffet’s business) bought $250 million in Snowflake stock following the IPO. Notably, though, Buffet rarely invests in businesses that aren’t profitable, preferring to invest in larger, stabler companies, such as Apple. Therefore, it bodes potentially well that he believed in taking this risk.

Additionally, Snowflake caters to very high-profile companies. It’s not just anyone that’s going to use cloud data storage of this caliber. Approximately 150 of the Fortune 500 companies are customers of Snowflake. There’s potentially some big money to be made for this company.

Consider the Cloud Data Storage Competition

Currently, people love Snowflake because it seems to offer better cloud data storage solution than its competitors. Its pay-as-you-go storage plan and ability to quickly scale up or down as needed seems to work better than the others in the market.

That said, the competitors are big names: Amazon, Microsoft, and Google all have leading cloud data storage solutions. Since those are companies that might be willing to invest more to pivot and match or exceed Snowflake’s services, there’s no telling for sure how long Snowflake will lead this market.

Moreover, there are additional companies that have some value in this market. For example, NASDAQ points out that Cloudera is a potential competitor. They emphasize that big data solutions are going to continue to be important in business. Therefore, investing in companies like this does continue to make a lot of sense. But whether or not Snowflake is the right one of those companies to invest in – well, only the market can bear that out over time.

Risk vs. Reward

When it comes to deciding whether or not to invest in the Snowflake cloud data storage business yourself, you really have to think about potential risks and rewards. After all, this IPO rate is unprecedented, at least for a software company. Therefore, there’s no way to know what’s going to happen to the value of the stocks over time.

Many experienced investors argue that the huge IPO debut is problematic. They worry that the fact that the IPO launched at such a higher rate than expected means that it can only go down. Therefore, they would advocate waiting for a dip in the price before investing. The idea here is that the price will dip down but then has the potential to go back up over time if the company does as well as predicted. So, if you can invest when the prices are a little bit lower, then you might profit more in the long run.

That said, the value of the stock hasn’t declined significantly since the launch. Of course, it changes daily. But, as of the writing of this post, shares are hovering around $270 more than a month after the IPO.

Summary: Should You Invest in Snowflake?

Cautious, conservative investors definitely say not to invest in Snowflake right now. The company does have the potential for growth, but the huge IPO means that even with that growth, value is likely to go down. Therefore, it’s a big risk.

That said, if you’re the kind of investor that likes to hop on trends and is willing to take a big risk in order to potentially profit, then you might have fun investing in Snowflake cloud data storage.

The middle-of-the-road option is to wait a little bit. See if prices go down some overtime. Be patient. And when it feels like they’ve hit their dip, invest carefully. Buy some shares, knowing that the market for Snowflake truly could go either way.

The Motley Fool Stock Advisor Review: Is It Good For a Beginner?

October 23, 2020 By Amanda Blankenship Leave a Comment

It seems just about everyone is searching for the perfect investing strategy. What is the safest and most effective way to make money in the stock market? Well, the truth is, it is constantly changing. Investing in the stock market is always a slight gamble. However, employing the advice of experts can greatly improve your chances of successful investments. That line of thinking prompted The Motley Fool Stock Advisor review you are about to read.

About The Motley Fool Stock Advisor

The Motley Fool has been a trusted name in personal finance and stock advice for more than two decades. So, it is no wonder that more than 600,000 people subscribe to its investment advice.

That is why the expert at The Fool went to work to develop a stock advising service to lend a helping hand to beginner and intermediate investors. You can use the stock advising service to get picks for your investments or simply gain more information about current market trends.

Some of the most stand-out testimonials amongst those who have tried its stock-picking service have called it life-changing. Others even attributed The Motley Fool’s advice to their own financial independence. So, I took a deeper dive into the service to see how its recommendations performed for me.

The Cost

First and foremost, The Motley Fool stock advisor is not a free service. You can access some fantastic investing information and news through its website, but you will not receive any stock recommendations or direct advice.

Typically, the stock advisor service runs at $199 per year. Right now, new members can get access for $99 a year, which comes out to $1.90 per week.

If you are wary about such a large expense, don’t worry. You can also access one month of the service for $39. Given the returns the company prides itself on, this is a small price to pay.

The Returns

According to The Motley Fool website, average returns on stock advisor recommendations have been 521%. That is pretty astounding. In fact, the stock advisor team boasts that it has outperformed the market in a 4-to-1 ratio.

How do they do this? Well, they comb every corner of the industry and find companies that may be largely overlooked by Wall Street. Then, every month, The Motley Fool Stock Advisor sends you two stock picks. It does all of the research for you.

After you receive your stock picks for the month, it is suggested you take a few minutes to fine-tune your portfolio and then follow the market trends. But how does The Motley Fool serve a true investing novice, like me?

Taking a Look at The Stock Advisor

The great news is that if you are a beginner-to-intermediate investor, The Motley Fool stock advising service is made for you. More seasoned investors will likely not fee they get as much from the advisor, but I think even they could benefit from a membership. Here is my honest Motley Fool Stock Advisor review after trying out the service with an investing simulator.

Pros

Some of the immediate pros of using a service like The Motley Fool include being able to rely on a reputable name and having access to stock picks right away. I think the peace-of-mind behind getting your investment advice from a name like The Fool is certainly a perk.

Additionally, there is a ton of data on each stock when you look into what the pros are suggesting. You can get historical data about the stock and how it has performed in similar market conditions. Other users can also weigh in on how the stock is performing for them.

Outside of the direct stock picks The Motley Fool suggests, you can also check out the “top movers” list. These are typically top performers for the day or stocks to be watching in the near future.

Cons

In my personal experience, using The Motley Fool stock advisor was extremely user-friendly. For someone that doesn’t know a lot about investing, it was great. The one downside I saw was that many of the stock suggestions, while I used the service, were tech-focused. I would like to see more variety in its recommendations, but this could be due to the current market as well.

Another con of the stock advisor service is that you can’t necessarily balance it out with your other investments. For instance, they may recommend investing in Netflix, but in combination with your real estate, ETF, and other investment strategies, it may not be the best decision. You still aren’t getting the full picture view.

My Motley Fool Stock Advisor Review

As mentioned above, I did not invest any real-life money in the market. I used a simulator to get an idea of how the recommendations perform. The Investopedia investment simulator prohibits traders from investing more than 25% of their portfolio into a specific trade.

Additionally, it is worth noting that I performed this experiment in October 2020. The market is crazy right now. Though, this is arguably the best time to test out a stock advisor service and get an idea of the kind of advice they are giving. Here are how my stock picks performed.

My Stock Picks

I picked Square (SQ) and Pinterest (PINS) as the two stocks to focus on. Both stocks came recommended from The Motley Fool on the same day. The simulator limits you from spending more than 25% of your cash on any single stock, so I was limited to 10 shares of Pinterest and 13 shares of Square.

Of course, those two investments did not take up all of my $10,000 in investment cash. So, I went back into The Motley Fool to see what other stocks they suggested. Among those listed were:

Autodesk (ADSK)
Wix.com (WIX)
Hubspot (HUBS)
Fiverr (FVRR)
Union Pacific (UNP)
NVIDIA (NVDA)
Nice Systems (NICE)
ASML Holdings (ASML)
Solar Edge Technologies (SEDG)

Other notable stocks among the top movers, while I used the service, were Netflix (NFLX), iRobot (IRBT), Slack Technologies (WORK), and Crowdstrike Holdings, Inc. (CRWD).

As you can see, most of the stock recommendations are tech companies. I decided to move forward with some shares in Solar Edge Technologies and ASML Holdings. I felt this gave me more of a mix. I also bought a few shares of Netflix (because I’ve always wanted to). Here is what my holdings looked like:

Returns on My Investments

As you can see, I invested about $9,800 of the allotted $10,000 the simulator gave me. Unfortunately, while I used the service, the market was generally down. I lost a little money, but every day the stocks The Motley Fool suggested performed well. Take a look…

Each stock I bought that they had suggested typically stayed in the green each day. Netflix, the only one that wasn’t in the picks they suggested, was the only one that really slipped into the red. However, it should be noted that Netflix was amongst the “top movers” on the day I got started. This area of the site continuously changes based on the performers each day.

Conclusion

When it comes down to it, The Motley Fool Stock Advisor is a great resource for people like me who haven’t yet started investing or are just getting started. Not only does it give you information about how the stock has performed historically, but you can get information about recent trends and how other investors are suggesting people move.

It was hard for me to stay off the stock advisor once I got in. For a beginner, it was all of the information I needed in one place to be able to make an educated decision. On top of that, the stocks they chose performed well.

So, whether it is for a month or a year, consider giving The Motley Fool Stock Advisor a try. At the very least, you’ll learn something about the current market trends.

Can You Buy a YouTube Channel?

October 20, 2020 By Trey LaRocca Leave a Comment

YouTube is one of the largest media platforms in the world. It operates as a fusion of entertainment and social media, and it has potential to be extremely lucrative. One of the hardest parts, though, is getting your channel started. Gathering those initial subscribers can take a long time, and there is a lot of investment that goes unreturned at from the outset. This begs the question: can you skip this process? Wouldn’t it just be easier to get somebody else to do that part, and I can take over after? Can I just buy a YouTube channel?

Popular Misconception

The answer many websites will give you is yes, you can buy a YouTube channel. There are a number of places on the internet that advertise channels for sale. You can legally purchase these accounts and use them to advertise or create boosted content right away. This answer, though, is incomplete; incomplete answers are wrong answers.

The Real Answer

It isn’t all that simple to buy a YouTube channel. While it is possible, and even legal, it is against YouTube’s Terms of Service. This is a zero-tolerance policy, and if it is discovered that you bought it, the channel will immediately be deactivated. This will lead to your investment, of both money and time, completely wasted. Now, there is some question as to how aggressively YouTube actually chases down accounts like these. This means that you could possibly fly under the radar, as YouTube has failed to act on some major channels that were pretty publicly purchased. To get a little more info on the subject, and how to do it yourself, check out the video below by Kevin the Financial Tutor.

Why Kevin?

Kevin is a finance YouTuber with previous experience buying and selling YouTube channels. As he explains in the video, he has sold 5 channels, and purchased 2 personally. He has made videos on many other topics related to various “get rich quick” schemes that are popular on the site. He does a pretty good job explaining the pros and cons, and this video is no exception.

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4 Reasons Why You Should Consider Day Trading Penny Stocks

October 15, 2020 By Susan Paige Leave a Comment

Yahoo finance list of penny stocks — Yahoo Finance List of Penny Stocks

According to Barron’s a penny stock is defined as:

A stock that typically sells for less than $1 per share, although it may rise to $10 per share after an initial public offering, usually due to heavy promotion. Penny stocks are typically issues by companies with a short or erratic history of revenues and earnings, and therefore such stocks are more volatile than those of large, well established firms traded on the New York or American Stock Exchanges. Most brokerage houses therefore have precautionary rules about trading in these stocks.

Barron’s Dictionary of Finance and Investment Terms, 3rd edition.

Despite the advantages of penny stocks, they can offer an opportunity to make money through day trading just like those that trade on major exchanges. Of course, you need to know how day trading works to leverage that opportunity.

But why would anyone choose to trade penny stocks in addition to, or instead of, the stocks on the exchanges?

Day trading penny stocks has several advantages, and the following four are the most important:

1. High Informational inefficiencies

When it comes to day trading, and indeed any form of investment, information is vital. It enables you to identify opportunities and the potential to make money as well as stop you from making critical investment mistakes. Indeed, professional day traders are always searching for information that gives them an edge at the marketplace.

Owing to how determined investors can be to know in advance about events that can affect stock prices, regulators like the US Security Exchange Commission (SEC) have stringent rules on how information regarding company performance and activities is shared. Indeed, releasing or using insider information to decide to buy or sell stocks is a financial crime in most countries.

With that said, information inefficiencies exist, and keen investors can legally exploit them to make a profit. For example, a company might file a merger with the regulator like SEC then take a few hours or even days before publishing a press release announcing it to the public.

A keen trader could see the filing on the regulator’s website and know that something significant is about to happen and therefore take appropriate investment steps. For example, buy more of the company stock if they believe the price is about to go up as a result.

It turns out, however, that the informational inefficiencies are higher in the penny stock companies than in the high-value stock companies. Often it is the result of poor information systems, lack of capacity or sheer incompetence. For a day trader, this is good news.

2. Fewer factors affect the price movement.

Often when deciding what to stock to buy or invest in, it is important to consider a lot of factors because, in the end, they affect the price movement of the stock. When buying stocks of the major market players, you have a lot more factors to consider than the companies behind penny stocks.

Many times some events affecting a company like Microsoft (MSFT) or Alphabet (GOOGL) can’t give you a clear understanding of how the stock price is going to react. For example, you might struggle to figure out how the investors are going to react when a multinational consumer goods brand like Procter & Gamble (PG) decides to sell one of its many products to a competitor. Would it inspire confidence or doubt about the company’s prospects?

Meanwhile, most penny stock companies have a single product in the market. Following news about that single product can easily help you be very accurate at predicting the future movement of the stock price.

3. You need a smaller capital to build a portfolio.

Many rules guide how stocks are bought and sold both on exchanges and over the counter. Some of these rules define how much capital you need to day trade particular stocks. For example, it is a lot complicated to buy a piece of a share (fractional shares). Also often there is a minimum amount of shares you can buy.

With major stocks, that means you need a significant amount of budget. For example, if a minimum amount of shares of a particular company you can buy is 100 and each costs $3000, then you need at least $300,000 to participate.

With penny stock, you may need to buy at least 100, but that ends up costing you a total of $50. What that means is that you can get in even with a small budget and you can also participate in many more plays even on the same day.

4. They are highly volatile.

When it comes to day trading, price volatility is good. The more volatile a stock is the more opportunities for trading it offers. Often the price of major stocks doesn’t move that much in a day. While that means stability for the company, it means fewer opportunities to make money for the day trader.

The position of the companies behind penny stocks is still unclear, and even the actual value of the stock is still a major question to many. Some might think a stock is overvalued while others hold the view that it is undervalued. Also, no one really knows whether the company will ever grow, and its product goes mainstream.

These factors make the price of their stock to be very volatile. This creates an opportunity for day traders to make money.

If you’re interested in making money, don’t forget to read these other great Savingadvice articles:

How To Improve Returns With the Motley Fools Stock Advisor

How Much Interest Will I Earn On $1,000,000?

Need Money, Get Naked