The phrase ?Write about what you know.? is sometimes credited to Mark Twain but there doesn’t seem to be hard proof of that. And it doesn’t really matter who actually said it or even if the advice is valid but perhaps investors can learn something about how to build wealth by transferring the sentiment to the financial markets. If you happen to be an expert on a particular industry, why not take advantage of that fact?
Let’s look at the stock market, specifically the video game industry, though this idea works anywhere. Some factors that contribute to a company’s worthiness are easy for anyone to track ? revenue, profit, growth. But then there are the intangibles that come along with intimate knowledge or interest. Maybe you’re a huge gamer with knowledge that can work to your advantage to build wealth through savvy stock picks.
Here’s a real world example. Take Two (TTWO) and Activision-Blizzard (ATVI) are competing NASDAQ companies who sell video games. At a cursory glance, they seem about even for potential investment. Maybe their side-by-side numbers look dead equal. However, what if you, as a hard core gaming addict, knew that Take Two was about to release another in it’s uber-popular series of games called Grand Theft Auto (GTA). GTA sales have always been through the roof and no one would expect this time to be any different.
You know about GTA’s imminent release down to the hour because you’re wet-your-pants ready and have already pre-ordered it from Amazon. That simple bit of ?insider? knowledge could make the difference in how much wealth you build off a gaming industry investment. In this instance, Take Two clearly becomes a better bet at this point. So, when it comes time to pick stocks, what are you interested in?
The Young Wealth Team
Flickr / Rob Boudon