The world is transitioning away from cash, with Visa (NYSE: V) likely to be a major beneficiary. The company enjoys a host of competitive advantages – such as its scope. According to card payment analyst The Nilson Report, there were nearly 300 billion purchase transactions made on credit cards globally in 2017, and Visa processed more than half of them.
Meanwhile, the barrier to entry in the payment-processing industry is exceptionally high. Not only does it take a small fortune to set up the infrastructure to process payments, but it also takes a long time for payment facilitators to build rapport with merchants and consumers.
Visa expanded its geographic reach in June 2016 when it acquired Visa Europe. With much of the world’s transactions still conducted in cash, there are great growth opportunities in regions such as Africa, Southeast Asia and the Middle East. In emerging markets such as India, Visa has a head start, with its CEO recently noting that Visa had more than a 50 percent share of debit and credit card spending in the world’s second-most-populous nation.
Finally, Visa is relatively unaffected by economic swings. Though the company does rely on purchasing to drive the processing fees it collects, it’s not a lender, so it doesn’t have to worry about credit delinquencies. Give it some consideration. (The Motley Fool owns shares of and has recommended Visa.)
Ask the Fool
Q: What are “lifecycle” funds, and should I invest in them? – M.D., St. Augustine, Florida
A: They’re often referred to as “target-date” funds and are meant to help you invest for retirement.
People are often advised to hold mostly stocks when they’re young and to shift toward bonds as they age. That can be a bother, so target-date funds do it for you. Each is focused on a particular year when shareholders would be expected to retire, and its asset allocation is adjusted over time as retirement approaches. If you plan to retire around 2040, for example, you might buy into a “2040” fund that will gradually shed stocks and add bonds over time.
Target-date funds vary widely, though. Before investing in one, consider each candidate’s fees, holdings and performance. (Funds with the same target year can have different allocation mixes.) Keep your big picture in mind, too. You might invest $25,000 in a target-date fund with an 80-20 stock-bond ratio, but if you hold $100,000 in bonds separately and your retirement is 25 years away, your overall asset allocation might not be what you want or need it to be.
Learn more about retirement strategies and investments at fool.com/retirement/index.aspx and money.cnn.com/retirement, and in our “Rule Your Retirement” service (fool.com/services), which offers solid, concise advice, along with stock and fund recommendations.
Q: How do I sell a stock when I have the stock certificates? – C.U., Erie, Pennsylvania
A: You can deliver them to your brokerage, which can then sell them for you, or you can ask the company what transfer agent it uses and sell through the agent. Sign the certificates first at a bank or institution that can stamp them with a “medallion signature guarantee.”
My dumbest investment
You can add WebVan to my list of dumb investments. It was a great idea with an unbelievably stupid ad campaign. The company had no clue who their core audience should have been. Their advertising targeted 20-something males when they should have been looking at working moms. Stupid. – Z.S., online
The Fool responds: You weren’t alone in being disappointed with WebVan. The Wall Street Journal called it “one of the most glorious flops of the dot-com-bust.”
The company’s concept of groceries being ordered online and delivered to customers’ doors was exciting – so much so that investors plowed more than $800 million into it, when it wasn’t even profitable. The company had smart management, invested heavily in infrastructure (such as high-tech warehouse fulfillment centers), and started out serving 10 cities and regions. In the year before it went out of business, the company took in only $200,000 – in top-line revenue, not bottom-line profit.
The story reinforces the important lesson that a great idea isn’t enough. Many great ideas never catch on – sometimes because their advertising doesn’t get the right message out to the right targets. Investing in unproven companies is riskier than favoring established enterprises. Interestingly, many WebVan executives ended up doing well. Some now work for Amazon.com, which is building out a grocery delivery business – at what it hopes is the right time.
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