Lessons from the Dot-Com Bubble
Everyone thought technology was going to eat the world in the 1990s.
There were already big names such as Cisco and Intel that were driving tech growth in this period. However, it was promising startups in the Dot-com space that drove the stock market boom that began in earnest in 1995.
From 1995 to 1997, the tech sector entered a pre-bubble phase where investment and speculation began picking up in the sector. Starting in 1998, the Dot-com bubble kicked off. From then up until 2000, a quick rise in US technology stock equity valuations began to take place. This surge was brought about by investments in the burgeoning set of companies that sprouted across the Internet.
Venture capitalists pounced at the opportunity of investing in any company that had a “.com” at the end of its name. Many of these investors dropped major cash on companies without even bothering to take traditional fundamentals into account, such as a company’s ability to generate earnings and profits. In some cases, capital flowed to companies with virtually no track record of success.
Large wads of cash were dropped into these Dot-com startups throughout the last half of 1990s in hopes that they would turn out a profit. Caution was thrown to the wind as emotions warped the mindset of countless investors during this period.
We also can’t forget the role the Federal Reserve’s easy money policies played. The Fed’s lowering of interest rates encouraged venture capitalists to pour their investments into Internet startups. Easy money coupled with fad-based investing, an overabundance of venture capital funding for tech startups, and these companies’ failure to generate a profit created the conditions for a classic economic bubble.
Although companies’ valuations rose, they rapidly blew through their cash. Scores of companies that did not have viable business plans or products unsurprisingly collapsed. Shortly after in 2000, the market crashed. Countless investors were stuck with severe losses and various Internet companies having to close their doors. Some of the more well-run companies such as Amazon and eBay were able to survive this mania and keep chugging along.
If there’s one lesson we can learn from the Dotcom bubble of the 1990s it’s that market actors can often behave in an irrational manner when it comes to their investments. We are all human at the end of the day. We follow trends and crowds, often to our own financial detriment.
That’s why in the Empowered Investor Pro community, we teach income property investors to behave differently from the crowds. When everyone is gambling on the stock market or investing in sub-optimal real estate properties in volatile cyclical markets, you do the opposite.
And by that, you invest in income properties that are located in linear markets.
Linear real estate markets are those whose prices remain steady over a period of years. They also tend to be located in the middle of the country, far away from coastal areas with expensive real estate markets (San Francisco, New York City, etc..)
Contrast that to cyclical real estate markets. These markets can fluctuate widely up and down in price. Cyclical markets are also much pricier, which leaves investors susceptible to heavy losses when sharp market downturns occur. Think of the real estate crash of 2007 and the financial crisis of 2008.
In the Empowered Investor Pro community, you’ll learn to avoid cyclical markets and embrace the reliability of cyclical markets.
You’ll also get to interact with a community with proven investors who are willing to teach you how to invest properly and manage your properties without having to worry about bad property managers who rob you blind.
You can only go so far alone.
To level up in real estate investing, you will need to find more experienced people in this field to give you high-level advice that will take your investment portfolio to new heights.
Here’s what you will have at your fingertips by becoming an Empowered Investor Pro member:
- A list of seasoned investors working in your market.
- A rolodex of the most proven handymen, painters, and roofers in your market.
- Cutting edge real estate software that helps you with property management, records your cash flow, and potentially saves you lots of money that usually gets sucked up by incompetent property managers.
Are you ready to step outside of your comfort zone and join a robust investing community that will give you the tools to reach your full real estate investing potential?
Sign up for Empowered Investor Pro community to elevate your real estate investing game and maximize your return on life!
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