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Motley Fool: An Alphabet for all ages

Alphabet’s coffers have ballooned to contain more than $94 billion in cash and investments – which can be used to buy more companies or pay a dividend, among other options. (Associated Press)
Alphabet’s coffers have ballooned to contain more than $94 billion in cash and investments – which can be used to buy more companies or pay a dividend, among other options. (Associated Press)

There is no company quite like Google’s parent company, Alphabet (Nasdaq: GOOG). The company takes in nearly $100 billion of revenue annually, and it’s still growing fast. In its latest quarter, Alphabet increased revenue by 21 percent year over year. Almost all that comes from advertising. Alphabet was estimated to have captured 43 percent of the $181 billion online advertising market in 2016.

Its Google is the world’s largest search provider and most popular website, and its Android mobile operating system enjoys greater market share than Apple’s iOS. Alphabet encompasses YouTube, Verily Life Sciences, Nest thermostats, solar-powered drones and more.

Investors in Alphabet get a dominant online advertising business coupled with the chance that one of the company’s “moonshots” will become the next big thing. The most prominent is Waymo, Alphabet’s self-driving car subsidiary. Alphabet is aiming to be the driving force behind this revolutionary technology.

Alphabet’s coffers have ballooned to contain more than $94 billion in cash and investments – which can be used to buy more companies or pay a dividend, among other options. Alphabet isn’t without risk, but it’s strong – and likely to reward long-term investors. (The Motley Fool owns shares of and has recommended Alphabet.)

Ask the Fool

Q: How freaked out should I be when the market crashes, say, 274 points, as it did recently? – C.D., Santa Rosa, California

A: Don’t freak out. Stocks and the overall market move up and down every day the market is open, with some of those moves being sizable. It’s smart to think in percentages instead of points, though – a concept that the financial media doesn’t seem to grasp. On Aug. 17, for example, the Dow Jones industrial average dropped a seemingly massive 274 points – the second-largest single-day decline in 2017. The Dow began that day at 22,025, though, and ended not that far away, at 21,751. Those 274 points represented a decline of only 1.24 percent.

There have been – and will be – many moves of much more than 1.24 percent in the market. In 1987, for example, the Dow plunged 157 points, but at the time, that represented a fall of 8 percent. A 2008 drop of 778 points was a 7 percent decline. Meanwhile, a seemingly small shrinkage of 38 points in 1929 was a 13 percent drop, followed the next day by a 12 percent fall.

Despite its volatility, the stock market’s long-term trend has always been up. Only keep money you won’t need for five (or even 10) years in stocks – and when the market plunges, grab your shopping cart.

Q: Are there any bills larger than the $100 bill? – F.W., Columbia, Missouri

A: There used to be. The Department of the Treasury and the Federal Reserve System discontinued $500, $1,000, $5,000 and $10,000 notes in 1969, because they were not being used much. (Indeed, they were last printed in 1945.)

My dumbest investment

A guy kept calling me about investing in a ski resort in upstate New York. He said, “How could you lose? You are investing in a mountain.” I lost the entire investment – and learned not to listen to anyone pushing stocks on the phone or via flyers in the mail. – Don K., Edinboro, Pennsylvania

The Fool responds: You got cold-called, which is rarely a great way to find outstanding investments. Any investments that are so terrific wouldn’t need salespeople to push them – those in the know would be snapping up all available shares. And, of course, you weren’t investing in a mountain. You were investing in a business. It probably wasn’t a publicly traded one, with shares of common stock trading on the open market and an obligation to regularly file audited financial reports with the Securities and Exchange Commission that are publicly available. Instead, it might have been a limited partnership or some other structure, which can be complicated, tax-wise and otherwise. You probably didn’t get a chance to look at its books and see how profitable it was (if it was indeed profitable) and how quickly its revenue and earnings were growing (not to mention its debt load and accounts receivable). Before investing in any company, public or private, you need to understand the company’s strengths and weaknesses, its risks and opportunities. You need to be reasonably confident the potential benefits outweigh the risks.

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