Investment Appeal

I was researching topics to write my latest blog post on and an article about Kraft foods caught my eye. You are probably well aware that over the last few days the NASDAQ has taken quite a hit. The major tech and bio tech companies in this index haven’t been preforming so well in the previous days. In contrast, some of the top preforming companies over the past couple days have sat outside the banking sector, notably Kraft foods. The company known for its Kraft Mac and Cheese, not only held its on in the recent plummet, but actually has realized a 2% net increase in its stock price.

It is clear that at a young age, investing in the stock market is a way to realize great returns over future years as we are able to ride out the highs and lows. Is it more promising, however, to invest in more boring stocks?

Appealing stocks such as Telsa and Netflix have experienced drops in stock price since the start of 2014, while the Utilities Select Sector (SPDR) fund has risen almost 9% since the start of the year. The biotech boom that the stock market faced in late February/early March has come to an end, with many companies looking at pre January stock prices. And many investors are feeling the pain as they bet on the high profiled companies, expecting the prices to continue to soar.

One investor who isn’t facing the problem is Robert Brown, Chief Investment Officer of Northern Trust.  Browne said he’s stayed away from many tech stocks with valuations he had trouble justifying. He instead likes to get paid in dividends, because they tend to instill discipline on company management.

In my personal opinion at a young age it isn’t a terrible idea to invest in companies that have potential for tremendous growth in the future. It is unlikely that utility companies will grow at the high rates some tech and biotech forms will undergo. Utility stocks are more of a safe, mid range bet. You will most likely experience a modest return on these stocks barring financial crisis. The down side is your money wont be growing at a top speed. As a prepare to leave college I am okay with placing money in tech and bio tech stocks hoping for the high gains over the next decade, however I realize it is likely that some companies will bust and I will lose on some of the bets. As I get older with more responsibilities I will be looking to move my money to companies that are showing modest long term gains, much like Kraft.

4 thoughts on “Investment Appeal

  1. zsalem

    Nice last points! I too have wondered if I should just ‘go for it’ with funds I have to invest. Lets assume that I got lucky (yay!), now what? I’m a little richer but not much because I hardly had anything to invest anways. Wheres the line for when I stop gambling? Its tough to decide…

  2. josimon

    There are many benchmarks you can reach through out your life time. In the market today, there may be a couple of good stock options to put some money on. There will be a point where you will see gains in your returns. For now, I believe it is best to work with what you’ve got and to diversify if possible. Unless you are confident in a single option however, then you must decide after what your next move will be.

  3. wyna

    Nice post. I feel your attitude of taking more risks in biotech and tech firms when younger and slowly moving away in the market, but I think it is still better to diversify in many sense. I think investing in the stock market 100% when young is a risk enough taken over investing in other assets like treasury bonds, etc.

  4. Corbett

    Interesting take on changing investment strategies with changes in risk tolerance. How do you think indexes (like those Professor Kimball is always supporting) play into this strategy. Are they reconcilable?

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