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The Spokesman-Review Newspaper
Spokane, Washington  Est. May 19, 1883

Motley Fool: Electrifying promise

Cruise AV, General Motor’s autonomous electric Bolt EV, is displayed in Detroit in January 2019.  (Associated Press)

Traditional auto companies such as General Motors (NYSE: GM) have been overlooked in recent years as investors have become enamored with electric vehicles, or EVs. Even companies with little or no revenue have been bid up to multibillion-dollar valuations. That may make GM’s large and profitable auto business downright boring – but its stock offers long-term investors potentially high growth over the next decade.

GM has announced that it’s going to transition its entire fleet to electric by 2035. With its growing lineup of compelling vehicles and manufacturing capacity that startups can’t match – as well as its own battery platform, Ultium – investors shouldn’t count out the company.

Not only is GM a leader in the future of EVs, but it also has a controlling stake in autonomous driving company Cruise, which could ultimately become the company’s most valuable asset. Cruise is developing technology to enable ride-sharing vehicles without steering wheels; GM’s role will be to manufacture these vehicles. If the world uses autonomous EVs to move beyond vehicle ownership, Cruise will be the path forward, and that makes GM’s future promising.

GM also announced the launch of a new business, BrightDrop, which offers a motorized pallet (to assist with warehouse logistics and last-mile deliveries) and an electric delivery van. There’s still more to come, such as a variety of cloud-based fleet management services.

General Motors is an old company, but it’s changing with the times.

Ask the Fool

Q: Is it best to invest only in mutual funds to avoid losing money in stocks? – D.G., New Orleans

A: You can make mistakes and lose money (or just not grow your money much) with many mutual funds, too.

The simplest way to invest in stocks for the long term is to stick to low-fee, broad-market index funds, such as ones that track the S&P 500 index of 500 big American companies. Invest a lump sum, or keep adding to your investment regularly, but either way, hang on through thick and thin. It’s important to not sell in a panic, as many people do when the market temporarily swoons.

It’s possible to make blunders with mutual funds, such as buying ones that have soared after one unusually good year, only to watch them underperform in subsequent years. Other mistakes include buying funds that charge high annual fees or that have high turnover rates due to fund managers buying and selling too often.

For the lowest fees and turnover rates, your best bets are index funds.

Q: Do single people need life insurance? – P.R., St. Joseph, Michigan

A: They often don’t. Life insurance exists primarily to protect anyone who depends on you financially, such as a spouse, your kids, your parents or perhaps even your business. If your kids are grown and no one would be hurt financially by your demise, you don’t need it.

It’s usually best to buy term life insurance, and just for the term over which you’ll need it. Don’t buy insurance as an investment, because you can end up with insurance you don’t need and an investment that’s less profitable than many alternatives, such as stocks.

My dumbest investment

My dumbest investment was investing in LendingClub’s initial public offering (IPO). I bought into the hype about it and learned the hard way that IPOs tend to benefit insiders most: Once the shares hit the public markets, it’s usually too late to cash in on that initial share price increase. – R.L., online

The Fool responds: Your take on IPOs is generally true. Here’s how it traditionally works: A company wants to raise money by selling off a piece of itself to the public. It works with investment banks to determine the company’s value and how many shares will be offered. So if the company seems to be worth $10 billion, it might sell 10% of itself – $1 billion worth – via, say, 50 million shares priced at $20 apiece. Insiders and well-connected big investors often get first dibs on the shares.

If there is much excitement when the stock debuts and investors are willing to pay more for shares, it will immediately pop in value, benefiting the early investors. Regular folks may only be able to buy shares at much higher prices.

Peer-to-peer lending pioneer LendingClub’s shares popped 56% upon their debut, but they were down 25% six months later – and have been heading south ever since. Once valued at $9 billion, the company was recently valued at less than $1 billion.

It’s often best to steer clear of IPO stocks, giving them a year or so to settle down.