What are the stock market’s most notorious “cult stocks,” and how do we identify them? While most investors consider “cult” to be a dirty four-letter word, the corporations that comprise this category have performed incredibly well over the past years. Whereas previously beloved companies like Yelp and Twitter (TWTR) have fallen 44.1% and 21.1% over the last two years, cult stocks like Ambarella (AMBA), Netflix (NFLX), Tesla (TSLA), Chipotle (CMG), and Amazon (AMZN) have experienced near triple-digit gains.
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You're Missing Out On $100,000s
Wealthfront, the Silicon Valley’s premier automated investing service, recently announced its decision to lower the minimum initial deposit requirement from $5,000 to $500, thereby giving younger individuals the ability to invest in an incredible product. For those unfamiliar with Wealthfront, it is a “robo-advisor” service that automatically allocates deposits into a diversified ETF (Exchange-Traded Fund) portfolio.
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When Bubbles Don't Burst
On March 2, 2015 the Nasdaq Composite Index, more commonly referred to as the NASDAQ, closed above 5,000 points for the first time in fifteen years. As this occurred, Wall Street trading floors swelled with the collective anxiety of investors who had observed the same milestone during the Dot-Com era (in March 2000). Only two days after the NASDAQ eclipsed 5,000 on March 9th, the tech-oriented index began its dramatic collapse.
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Invest In Change
Do you want to start investing in the stock market? Do you want your money to consistently grow? Are you held back by fear and confusion? If you answered “yes” to any of these questions, we encourage you to research a new investing app called Acorns. It’s a low risk, automated money management platform that introduces young investors to the many aspects of trading.
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Orca's Sink SeaWorld
SeaWorld Entertainment Inc. (SEAS) is facing a whale (technically, an orca) of a problem. Since the 2013 release of the documentary “Blackfish,” which targeted SeaWorld theme parks, claiming that undersized orca enclosures promoted aggressive behavior (which led to the deaths of many trainers), the company’s stock has literally been sinking.
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Minimize Risk, Maximize Return
There is a discernible thrill to picking stocks correctly. Carefully considering risks, weighing possible options, and evaluating every aspect of a company, pulling the trigger, and finally seeing all your hard work pay off is extremely satisfying—and it can be very profitable too. While one must take care to avoid being sucked into the gambler’s paradise of day-trading, there is clearly an important role for the active investor, in value and growth. But there is an obvious catch: consistently successful trading is extremely difficult (read more here).
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The Investor Balancing Act
This week I’ll shift away from the cognitive biases and irrational behavior that affect our decision-making, and instead shift my focus towards one of the most important aspects of investing: portfolio theory. Modern portfolio theory (MPT) focuses on building a portfolio of assets that maximizes the risk-adjusted return—that is, maximizes the expected return of an investment portfolio while minimizing its risk (learn more about how to avoid risk here).
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