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Disruptions in the Market and Whether Investing Is a Good Idea

The dictionary defines a disruption as a disturbance or problems that interrupt an event, activity or process. A market disruption has typically been defined as a situation wherein markets cease to function in a regular manner, typically characterized by rapid and large market declines, according to Investopedia. I would like to take a different look at this. For the sake of this article, a market disruption is when a company brings a product or service to a previously established market that causes a disturbance.

Companies that have caused market disruptions in recent history were Amazon’s entrance to the retail market; Uber disrupted the ground transportation market; Netflix’s disturbance of the movie rental space; Facebook revolutionized the way people interacted and companies advertised; DraftKings disrupted sports, and there are countless other companies that have disrupted certain markets such as Airbub, Apple and Waze.

In terms of investing there are only three real choices:

Blue chip companies and established companies

Companies in emerging markets such as the cannabis market

Companies that have disrupted their market

There are advantages and disadvantages for all three groups:

Blue chip and established companies:

Advantages – Stable companies typically have stable earnings. In market downturns these companies typically remain stable

Disadvantages – Slow growth in earnings. There is more a focus on dividends rather than increase of stock price.

Emerging market companies:

Advantages – Potential of rapid growth, offers the investor diversification of their investment.

Disadvantages – Subject to law changes which could place earnings in jeopardy, competition between companies in the market can cause issues for investor selection.

Market disruptions:

Advantages – Potential of more growth than a company in some of the emerging markets, early investment gets investor in on the “ground floor” or close to it.

Disadvantages – Stock price may experience violent swings up and down in the beginning.

Companies that disturb the market are great investment ideas, somewhat risky but a great option nonetheless.  Every person must make their investment choices based on their situation and it makes sense to make these decisions with the help of a professional who can help you navigate risk, recognize your risk tolerance and build a portfolio suitable for your age and need.

A young investor may have their investment portfolio broken down like this: Blue chips (15%), emerging markets (25%) and market disruptions (60%) while an older investor may have their portfolio set up like this: Blue chips (40%), emerging markets (30%) and market disruptions (30%).

These are examples. Before investing, seek the help of a financial professional.

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About Frederick Towles

Frederick Towles is an entrepreneur, author and professional coach on personal finance, recognizing, seizing and leveraging opportunities of all kinds. Frederick founded The Towles Group Inc. to address issues that relate to small businesses and individuals – accounting, taxation, asset protection, financial compliance, wealth creation, debt management and business management. He also founded Unlimited Expectations Inc. which provides tools for individuals to assist them in the areas of opportunity recognition, leadership and personal finance. Through the tools and services offered by these companies people are positioned to operate their lives and their businesses at optimal capacity.

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