Most people waste their time when they start out investing. This is because they don’t set up their portfolio for success. This ends up costing beginner investors in the long run as they miss out on potential growth. Here I am going to show you the 4 types of stocks that everyone should own for growth so that you don’t miss out.
The 4 types of stocks that everyone should own for growth are ETFs, Tech, High EBITDA, and emerging sectors/economies. Just by being aware of these stocks you will instantly open up your portfolio for massive economic potential.
Here at Chronohistoria I teach people how to generate above normal returns in investments. I routinely publish articles on investment research, methodologies, and tips/tricks of the trade so that you can make more money. There is a free newsletter that you can sign up for if you want to remain up to date on everything involving investments.
Without wasting any time let’s jump right into the article.
Growth Stock Type 1: ETFs
The acronym ETF stands for Electronically Traded Fund, and it does exactly what it sounds like. An ETF simply takes a collection of stocks and splits up your investment among them. This means that when you buy 1 share of an ETF you actually buy several hundred smaller investments.
Investing in ETFs is the single best thing a beginner investor can do. This is because you will capture a majority of the growth in a sector while significantly lowering your total risk in the investment.
The above graph demonstrates how effective ETFs are for capturing growth. While a stock portfolio in theory would return a higher amount per year the risk is not worth it. In the above graph a stock portfolio only returned an extra 20% growth while increasing risk by almost 200% over the ETF portfolio.
Simply put, ETFs are the way to go if you just want to grow a portfolio overtime. An ETF will capture a majority of the possible growth while also significantly lowering the total risk in the position.
If your interested I wrote up an entire article on the top 5 ETFs for beginners to look at. (You can find it by clicking here)
Growth Stock Type 2: Tech
It is no secret…tech stocks are the way to go for the foreseeable future. The reason behind this is rather simple, tech stocks have massive discretionary capital they can reinvest in the business.
This reinvestment can take two different approaches. First, a tech company can build out another product or services (R&D). This approach is highly costly and does not always produce results. A Lot of tech companies will start investing in R&D and then pivot into the second reinvestment approach.
The second reinvestment a company with high EBITDA will take (tech) is to directly buy out smaller tech companies and merge them into their business model. Since tech companies have so much extra cash laying around (EBITDA) they are free to buy up smaller companies easily.
In fact there is a whole industry of mergers and acquisitions that cater just to these large tech companies. Tech companies with lots of mergers and acquisitions going on typically outperform the market drastically. (Here is an article from 2019 that goes over how powerful M&A in tech can be for potential returns in the market)
In fact nearly 20% of the U.S market is currently composed of large tech companies such as Google, Facebook, Amazon, and Microsoft.
Investing in large tech companies typically boosts your portfolio’s total return by around 3-5% which over time adds up a lot.
Growth Stock Type 3: High EBITDA
Occasionally you find a company where their finances are so good that the excess cash left over at the end of a quarter/year is huge. This huge lump sum of cash means that the company can reinvest their earnings back into the company and create a runaway snowball effect.
These companies don’t always have to be a tech company. Really any super successful company could have a large EBITDA. One of the major ones I wrote up an entire report on recently was Coinbase (COIN). (If your interested in reading the research article click here)
In Q2 of 2021 Coinbase reported that their EBITDA was over 1000% higher than previously expected. Because of this Coinbase had a ton of extra cash laying around that they could use to reinvest into their business.
Logic would dictate that high EBITDA companies would reinvest into other products or services. This is why high EBITDA companies are great investments. Because you’re investing in the company doing the right thing and expanding into other products or services.
Growth Stock Type 4: Emerging Sectors/Economies
One of the best ways to beat average market return is to invest in an emergent sector or economy. Typically when a country goes from a second world to a first world economy there is a massive growth in a consuming population. For example when people increase in wealth into the world’s middle class they typically invest in dental care.
In this case you could invest in the dental care practice in this emerging sector/economy to see a massive increase in wealth overtime. One great example of one of these emergent sectors/economies is the growing middle class in India.
From the mid 90’s up to the mid 2000’s the Indian economy stagnated. Starting in the early 2010’s India started exploding in economic growth and with that so did a fledgling Indian middle class. This middle class has started to consume outside products and services including healthcare and consumer goods. (Source)
Because of this we can invest in this growth overtime. There is an ETF that follows the Indian economy called EPI. If you’re looking for growth then investing in an emergent sector such as India or any other growing sector is a good idea.
For India by investing we are exposing ourselves to another market besides the U.S. This lowers our total risk exposure and further increases our gains when done properly. If you’re interested I wrote up an entire article about the Indian ETF EPI and how you can best position a portfolio to gain from it. (Click here)
There you have it: the 4 types of stocks that everyone should own for growth. Just by knowing how each of these stocks adds to your portfolio you are going to expose yourself to a larger economic gain then others would.
Learning how to generate above average market returns in a stock portfolio is key to beating the market and coming out on top of inflation. That’s what I am here for, I teach people how to generate above normal market returns in their portfolio so that they can rest easy at night knowing they are generating capital.
Feel free to subscribe to the free newsletter to remain up to date on everything investing. I routinely publish articles on everything investing so that you can generate more.
Further you can check out some of the other articles below.
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Until next time, I wish you the best of luck on your investing journey.