New Opportunities

As someone who is interested in the automobile industry, I took special interest in the announcement today of a partnership between Tesla and Toyota. Tesla is a young, Silicon Valley start-up electric automobile manufacturer and Toyota is the large global auto giant that has gotten a bit of bad press recently. So what does this announcement have to do with investing?

Tesla has been producing a very expensive electric roadster that has sold well to those who can pay over $100,000 for a car. Tesla's next product is an electric sedan that should be affordable to more buyers at about $50,000. Toyota (along with most auto manufacturers) has experienced a slowdown the past couple years and recently closed a large auto factory in the San Francisco Bay Area, which was formerly a joint venture with General Motors.

Today's announcement was that Tesla would buy the closed factory from Toyota to manufacture its future products and learn from Toyota's expertise in manufacturing. Toyota announced that it would invest $50 million in Tesla to learn from some of its young, venture-like thinking and methodologies and jointly produce electric vehicles in the future.

In my opinion, this announcement is a great example of the transitions that happen in a free-market economy and the opportunities that news ways of thinking and doing things can provide. Tesla is focused on the future of automobiles, without being restricted by oil or labor unions. Toyota is looking to improve its image and rekindle some energy that large organizations tend to lose over time. A well structured investment portfolio can be designed to take advantage of these transitions and the opportunities they provide. Although an economic downturn causes a lot of pain and upheaval, it also opens new doors and allows new ways of thinking. As an investor, I like to look forward for the growth and changes that might be just around the corner.

Risk & Volatility

Anyone who follows the news headlines heard about the dramatic drop in the stock market yesterday. Although it was followed by a significant recovery, there was a point yesterday where the Dow Jones Industrial Average was down almost 1,000 points. What caused this to happen and what does it mean about the risk of investing in the stock market?

There is speculation about the exact cause of yesterday's volatility, but it was most likely caused by a combination of global economic uncertainty, computerized trading programs and human trading actions. All of these factors confirm that investing in equities does carry risk and this risk becomes more apparent when uncertainty exists. Our world economy has become more volatile and uncertain in recent times and the changes in the market show this.

Despite the volatility, developing a well-diversified, long-term investment portfolio is still the way to achieve returns that stay ahead of inflation and to build real wealth over a long period of time. Recent events confirm the need to have a well-thought-out financial plan and appropriate investments which support the risk this financial plan allows. Having a plan like this in place allows the short-term emotion of the markets to be viewed as "noise" and the long-term goals remain the primary concern.