​When the Next Big Thing…Isn’t

Henry Truc |

Investing in growth opportunities is an alluring venture. It’s why we focus on trying to identify these opportunities at Equities.com on a daily basis. Which industries - and which companies within those industries - are going to be the giants of tomorrow, and make their investors rich in the process?

That being said, high risk and high reward always sounds great when the sky is the limit. When your eyes are fixated on the upside, you tend to leave yourself vulnerable to downside possibilities. That’s risk...and it isn’t supposed to be a good thing.

While there’s immense wealth to be made by identifying the next Facebook (FB), Apple (AAPL), Tesla (TSLA), Netflix (NFLX) and so on and so on, most investors—especially you pesky millennials that are just now entering the market—may not know what it looks like when you’re stuck in a position you just can’t (or won’t) get out of. Simply put: It’s not fun.

The purpose of this exercise isn’t to scare our readers straight and away from these types of opportunities. Far from it. It’s to demonstrate that there are real stakes to investing, especially when it comes to growth opportunities with the potential for major returns. Always be selective, and educate and inform yourself as much as possible before jumping into just any old trend. Remember, it’s your money.

Whatever Happened to 3D Printing Revolution?

While 3D printing stocks seem like an easy target for ridicule now, it’s a prime example of when a fade fails to catch on as the next big thing, and what could happen to investors along the way. Make no mistake, there are very useful applications for 3D printing technology. From a manufacturing perspective, and even a scientific one, 3D printing can do wonders.

That said, it never lived up to the hype (at least not yet) among mainstream consumers. Perhaps spoiled by the smartphone and social network revolution, investors were hungry (in fact, many still are) for the next disruptive product that would once again revolutionize the world. So they bought into the idea that there would be a 3D printer in every home, and drove up stocks like Stratsys (SSYS) and 3D Systems (DDD) to unprecedented heights.

For investors that were in these stocks early, the run-up was a major windfall. For those that got in when the hype machine was in full swing, it has been a long ride down. Mind you, take a look at the timeframe in those charts. The rise and fall of the 3D printing hype was as recent as only a few years ago.

Again, the 3D printing market is one example of when an idea fails to catch fire and an investment theme doesn’t pan out. But it isn’t the only one. Sometimes it may just be a matter of timing. Early investors jumping in too soon in on marijuana stocks in early 2014 could serve as an example of a market getting ahead of itself.

Other times, it’s a matter of overestimating the growth prospects of an emerging niche market. GoPro (GPRO) and FitBit (FIT) are two stocks staring at that possibility right now after a rough 2015.

Again, there are real risks when playing these high flying sectors. This is what it could look like if it goes the other way.

Invest with Skepticism but Not Cynicism

A healthy dose of skepticism can go a long way when it comes to investing. Just imagine how much pain investors could have saved themselves if they had just applied a more discerning eye to the examples above.

But it’s also equally important to not brush off these opportunities altogether. They do exist, and the potentially life-changing financial rewards of picking the right ones (at the right time) is very real. As hard to believe as it may seem now, there were many investors that wrote off social networking and smartphones as passing fads when they were on the rise.

Innovation and industry revolutions happen all the time. Just look at what’s happening today in the crowdsourcing space with companies like Uber and Airbnb, or all the innovative companies growing in the Fintech and Medtech industries.

The hard part is separating fact from fiction, dedicating yourself to the research and analysis, and cutting your losses when you know deep down an idea isn’t panning out like you had hoped. When it comes to looking for the next big thing, there’s a big difference between investing in the opportunity and not the hype.

Henry Truc is the editor of Equities.com. You can follow him here and on Twitter @henrytruc.

DISCLOSURE: The views and opinions expressed in this article are those of the authors, and do not represent the views of equities.com. Readers should not consider statements made by the author as formal recommendations and should consult their financial advisor befor

Companies

Symbol Name Price Change % Volume
GPRO GoPro Inc. 9.37 0.00 0.00 5,849
TSLA Tesla Motors Inc. 193.15 0.00 0.00 18,093
FB Facebook Inc. 117.95 0.00 0.00 40,115
AAPL Apple Inc. 111.03 0.00 0.00 43,805
SSYS Stratasys Ltd. 18.94 0.00 0.00 0
FIT Fitbit Inc. Class A 7.97 0.00 0.00 197,676
NFLX Netflix Inc. 125.39 0.00 0.00 2,573
DDD 3D Systems Corporation 15.00 0.00 0.00 228

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