July 17, 2018
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Investing By Industry

Investing in stocks can be a tricky business. The goal, of course, is to find stocks to buy low and then hold onto them as they grow in value, later selling them for a profit. But if it were easy to spot every growth opportunity, then everyone would be making money off of the stock market! The reality, of course, is that the stock market has losers as well as winners. And while the stock market generally goes up over time, there is a virtue to being able to spot the stocks that will grow the fastest — and to avoid the companies that will decline in value and perhaps even fail. One way to do this is to look at the market on an industry level, identifying the areas of our economy that are likely to grow.

Investing By Industry

Balance and risk: how to invest in an industry

The idea behind looking at stocks at an industry level is simple: some industries are more likely to grow than others, so it pays to invest in a way that targets the big growth opportunities. It doesn’t take much brain power to realize that tech stocks have been a better bet over the past decade or so than, for instance, cable stocks. But identifying the next big growth area is the key — and it’s not without risk.

That’s why taking an industry-level view of the market doesn’t mean ignoring the realities of safe stock investing. You will still want to maintain a balanced portfolio, and you should have plenty of your overall value spread across different stocks in different industries (perhaps an index fund or a managed fund can help you there). However, once you’re comfortable with your safety net, it’s possible to make a bet on an industry.

How can you make this kind of bet? You can, of course, just buy stocks of companies in that industry. But don’t just buy a bunch of one company’s stock! Do your research and create a diverse portfolio. Don’t forget about other investment vehicles: look for mutual funds and exchange-traded funds that focus on the industry that excites you. Combining your decision to target a specific industry with the careful stock selection of an active fund manager can give you better results.

One example: cannabis stocks

Need an example of the power of industry-based investment? Look no further than one of the fastest-growing industries on Earth: cannabis.

Thanks to recent changes in marijuana’s legal status, an entirely new legal industry has cropped up (no pun intended) in the United States, Canada, and beyond. Marijuana has long had an enthusiastic customer base, so this new industry is having no trouble finding customers. On the contrary: folks are lining up to get their hands on cannabis, which is supplied by a limited number of licensed growers and dealers in the states and countries in which it is legal.

The growth has been remarkable.

All of this growth creates investment opportunities. A quick look at news and tickers on sites such as mmjstocks.com will show you that cannabis stocks are performing well and that picking the right stocks and funds has been a pathway to profits for savvy investors.

The cannabis industry isn’t the only industry like this, of course. It’s just one example of a fast-growing industry — one that can mean big profits for investors.

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