View from the Observation Deck

1. The chart above shows the quarterly venture capital (VC) flows into Internet-related and biotechnology companies over the past decade. These two themes, along with traditional technology industries, have consistently been the most popular.
2. Historically speaking, many retail investors have been interested in knowing what the so-called "smart money" is buying. Smart money is somewhat synonymous with institutional/high net worth investors.
3. VC investing is speculative in nature. Capital is funneled into companies at various stages of development. A stake in a biotechnology firm, for example, could hinge on the success of a single new drug or medicine.
4. While VC investors are looking to get in at or about the ground floor of an opportunity, ultimately, the financial reward is realized when (and if) the company they invest in goes public (IPO).
5. Retail investors can participate and seek to prosper in these same themes by investing in established companies already listed on an exchange.
6. From 12/31/01-12/31/11 (same span as in chart), the Dow Jones Internet Composite Index and NYSE Arca Biotechnology Index posted cumulative total returns of 135.8% and 88.1%, respectively. The S&P 500 returned 33.3%. (Past performance is no guarantee of future results.)