What are the difference between younger listed firm and mature listed firm?Which one will you invest?Why?

Question

What are the difference between younger listed firm and mature listed firm?Which one will you invest?Why?

Answer 1

companies go through a lifecycle of their own.  In the beginning, they are entreprenuerial,  either creating a brand new product and staring out with large market share, or innovating something in the production process that gives them some kind of competative advantage, or simply locating near an underserved market.  Any way you slice it, the company exists because it can do something better than its competitors for some segment of its market.

A young firm has greater growth potential, but higher risk.  It is often untested in the face of a lot of competition for its particular niche of customers.

So you invest in a younger firm if you are looking to hit a homerun investing, and are willing to have some of your investments fail.

A mature firm has been tested and has a track record.  Its farther along in its business cycle, often milking earlier investments in R&D and operating some part of its portfolio of products near the product life cycle where they are cash cows, and plowing that money into R&D for the next round of products.  The mature firm is more stable, it may pay a dividend, or at least is more reliable in terms of year in and year out returns.  The upside is limited, and its stock will still go up and down with the market in general, but overall its going to be more likely to be a safe and moderate return.

So you invest in the mature firm for more stability.

Ideally, you diversify within and among various markets and industry segments so you have a portfolio that includes the right mix of reliability and upside potential for the investment goals you have.  the younger you are, the more likely you want to accept some short term risk for longer term gain.  As you age, you begin to invert that ratio, so you hold more stable stocks with more modest returns.

These days you can do this with funds vs individual stocks