Editor's note: You can make huge returns by only being right 50% of the time…
Today, Exponential Tech Investor editor and Casey friend Jeff Brown explains how. Jeff is a 25-year veteran tech insider and former CEO…one who’s taken multiple companies public. He's built a successful career identifying tech companies that are well-positioned for exponential growth.
Below, he shares a simple step you can take to make terrific returns—with far less risk than you might expect…
By now, you probably realize there are enormous investment opportunities in future technology.
As I’ve mentioned in past essays, I believe the world is going to change more in the next 10 years than it has changed in the past 40 years. The rate of progress will astonish you.
Great change brings great opportunity. Investors in transformational technology stand to make a fortune. That’s our goal in Exponential Tech Investor.
In order to get the greatest benefit out of investing in small, cutting-edge technology firms, it's crucial to view your tech holdings just like a billionaire “venture capital” (or “VC”) manager would.
Remember: Venture capitalists fund early-stage businesses. Their goal is to earn stupendous returns when those small firms become huge businesses like social media website Facebook or biotech giant Gilead Sciences.
Both of these firms produced gains of over 10,000% for their early investors.
Early-stage companies are riskier investments than established firms like Coke or Intel. That’s why the payoffs can be so huge.
But to succeed as an investor in early-stage tech firms, you have to realize a hard fact of life: Not every investment is going to work out.
You're not going to achieve success on 100% of your “VC-like” investments.
You probably won't achieve success 75% of the time.
When you invest like a venture capitalist, you can be right less than half the time… and still make giant returns. The best venture capitalists know that even if less than 25% of their investments work out, they can make a fortune.
When it comes to investing in tiny tech companies, your “winning percentage” is relatively unimportant. That’s because the “wins” in early-stage tech aren’t wins of just 25%… or 50%… or even 100%.
When an early-stage tech firm “hits” the magic formula that made Cisco, Dell, and Microsoft so successful, the returns easily go past 1,000%. They can even hit 10,000%… 20,000%… even 50,000%-plus. During the decade of the 1990s, Dell Computer gained over 80,000%.
Gains in technology can be so astronomical because the best technology is “scalable.” This means that once you create a great technology, it can be replicated and sold all over the world at a low cost.
For example, once Facebook hit upon its winning social media platform, it quickly rolled it out to the rest of the world for a relatively low cost. It acquired over a billion users and generated billions in advertising revenue. Facebook is now worth about $300 billion… and it is still growing.
Or, consider Microsoft. Once it designs a good piece of software, it can sell that software millions of times. The production cost of future “units” is tiny.
Early-stage tech firms have incredible potential, but they also have higher failure rates than most sectors. That’s why it’s important to spread your investment dollars around a basket of early-stage ventures. By doing this, you’ll suffer some losers… but hit some major winners.
When you score big wins in the tech sector, you can be right just half the time and make huge profits. That’s why great venture capitalists spread their risk by taking small stakes in many different companies.
Some easy math shows us how it works…
Let’s look at a hypothetical investment example. On January 1st, you buy stakes in 12 different firms. You hold the stakes for three years. The returns of these 12 firms after the three-year holding period are listed below.
As the table shows, six positions were losers. Only half were winners. It’s a winning percentage of just 50%.
But because you hit a few big winners, you made a terrific average return of 108% across the 12 positions. You made this great return while being right just half the time.
The tiny companies we’re recommending in Exponential Tech Investor have the potential to return you three, five, and in some cases, more than 10 times your money.
Think like a VC. By sprinkling your VC dollars on a basket of firms, you’ll achieve large returns, while taking lower risks.
Editor, Exponential Tech Investor
P.S. There’s a huge change coming to the stock market… One that could send shares of “safe” blue chips like Apple and Microsoft plummeting. But I want to show you exactly what's happening and how to prepare for it…
That’s why I'm hosting a special online (and absolutely FREE) training event next week. To make sure you don't miss out, I urge you to register now. Click here to learn more.