The World Wide Web was a strange concept to investors at first. Many had their doubts. They thought it was just going to be for universities to share information.
In 2017, the Web is such a normal, easy to grasp concept. But in 1990, that wasn’t so. Never before were people able to share information globally in the blink of an eye. If you wanted to share data quickly, you needed to be in the same room.
How far we’ve come.
The Web didn’t just revolutionise information sharing. It was the single biggest technology improvement for many businesses. For example, small companies were no longer restricted to local markets. They could use the Web to put their goods and services in front of millions.
And when Dot-com companies started to make an impact on the market, investors took notice. The personal computer and the internet were becoming the new must-haves. The first online companies had a rocky start. But a select few soon grew into giants.
Heading further into the 90s, you were crazy not to have tech stocks in your portfolio. Even stocks with no earnings doubled and tripled in some cases. The industry was like a money printing machine to investors.
From 1990 to early 2000, the NASDAQ climbed 1,001.84% to a then high of 5,048.62 points. If you managed to get into the right stocks, your returns were far higher. For example, over the 10-year period Microsoft Corp [NASDAQ:MSFT] climbed 9,112.76%.
A $5,000 investment in Microsoft would have turned into $455,638. That’s not including stock splits or reinvested dividends.
Of course the market eventually came screaming down. The industry was chock full. And a lot of them were tech companies going nowhere.
In hindsight, it was risky investing in technology towards the late 1990s and early 2000s. The Dot-com bust is now thought of as having been inevitable. But making extremely high returns will encourage you to turn a blind eye.
But if you could go back to the early days of the web, before the market really took off, would you keep your money off the table? Of course not.
And as we head into 2017, I believe the same is true as it was for the early 90s. You’d be crazy not to have some of your money in technology. If you think the world is going to hell or you believe we are in for booming times, you should have some exposure to technology.
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The new electricity
Earlier this month, hundreds of thousands of people flew to Las Vegas. They weren’t there to gamble. Instead, they were there for the 2017 Consumer Electronics Show (CES). It’s the biggest trade show for consumer electronics in the world.
On show were driverless cars, robotics, artificial intelligence, and a whole lot of smart stuff. You might think, yeah, yeah, I’ve heard it all before.
And it’s completely understandable to have this attitude. The mainstream media frequently uses terms it shouldn’t. Or they try to paint simplistic versions of the future when they have no clue.
I’m not saying that I’m a futurist that can predict exactly when things will happen. But 10, 50 or 100 years from now will be a lot different to today. And it’s because of disrupting technologies that are emerging right now.
For example, driverless cars won’t just be getting you from A to B. Oh no. They will radically change the way we think about mobility.
Instead of a car, think of a pod. This pod can go anywhere you’d like. You can either relax, sleep, or be entertained for however long you wish. Well, this is what driverless cars will be, and then some. No more long commutes into the city every morning. No more waiting in traffic. The road toll will decrease significantly. And we will all think differently about location.
What about AI? It’s commonly thought of as a system which is very good at one task. This might be playing chess, calculating complex equations, or trading stocks. This is weak AI, a system that performs a narrow set of tasks it’s been programmed for.
True AI, or strong AI, is a system which has the intellectual capability similar to humans, including the flexibility to learn new tasks. The only difference would be, AI could solve problems, think and learn much faster than humans. What that type of AI could do could be limitless.
Chief scientist of Baidu Inc. [NASDAQ:BIDU], Andrew Ng even compared it electricity. Speaking at the Nikkei Innovation Forum, Andrew Ng said:
‘I make this analogy that Ai is the new electricity. A lot of years ago, as we started to electrify the U.S., that transformed industry after industry.
‘Everything from factories [to] agriculture, transportation and communication was transformed by electricity. I think that we now see a clear path for AI to transform multiple industries and well.’
And a lot of these tech developments aren’t some distant thing that might happen in the future. Driverless cars are already being trialled on roads. AI capabilities are improving every year.
We’re only at the beginning of huge technology investment opportunities. And some of the best opportunities will come from the smaller end of the ASX, from unknown companies with their most explosive growth still ahead of them. There is more risk when putting your money in these small-caps. But that’s why you should only invest what you’re willing to lose. And if you can manage your losses while letting your winners run, small-caps can be extremely profitable.
The hard part is to get started. Where do you look? How do you know you’ve found a stock that has massive potential?
That’s something small-cap specialist, Sam Volkering can help you with. Sam has spent his whole life around technology and small-cap stocks. He knows what makes a great investment, and the ones you should steer clear of. Many times, Sam will see an investment opportunity before every other investor’s jumps in.
This ability has allowed him to pick extremely high return stocks in his advisory service, Australian Small-Cap Investigator. Sam’s top three investments are up 312.10%, 327.40% and 818.40%. If you want to know how Sam can get you the best possible small-cap stocks, click here.
Contributing Editor, Money Morning