If you're new to investing, start with Subscription businesses.
$NFLX, $SPOT, $COST & $HIMS
That's exactly what I did when I started. If you have no idea where to even begin looking, subscription businesses are the easiest place to start.
These are companies where the majority of the money comes from one single source, and that's what makes them so easy to understand. You don't have to untangle a dozen different things to figure out how they make money, because it all comes down to people paying every month.
Netflix is the perfect example.
Almost everything they earn comes from people paying a monthly fee to watch shows on their platform. Those same people pay again the next month, and the month after that, so the company already knows roughly what's coming in before the month even starts. That steadiness is the whole reason these businesses are so attractive, and once you understand it, a lot of investing starts to make more sense.
The most important thing to look at is how long they manage to keep their customers, because that's where the real money is. If Netflix can hold onto you for five years instead of one, that's five times as much money from the exact same person, without spending anything extra to get you. So when a company gets even slightly better at keeping people around, it makes a massive difference to how much they earn over the long run.
These companies also have room to raise their prices very gradually. You've probably watched your own monthly bill go up by a dollar or two over the years and barely thought twice about it, so you kept paying. Spread that small increase across millions of customers and it turns into a serious amount of money, and it works even better once the product has become something you use without thinking.
Another thing that makes them powerful is how much they can afford to spend to win you over in the first place. Since the company already expects you to stick around and pay for a long time, it makes sense for them to spend more upfront to get you signed up, knowing they'll earn it back over the months and years you stay. That gives the strongest companies a real edge, because they can keep pulling in new customers while still making money on each one.
There's also the habit side of it, which is easy to overlook. When you watch Netflix every night or put Spotify on every time you get in the car, the product quietly becomes part of your daily routine. Once it's woven into your day like that, most people just keep paying, because canceling feels like more effort than it's worth.
On top of all that, these businesses give you a really clear read on how they're actually doing. Because the payments come in steadily every month, you can easily tell how many people are using the product and whether that number is growing or shrinking, which makes your job as an investor a whole lot easier.
And once one of these companies gets big enough, it can start adding even more ways to make money. With millions of people already paying every month, it can introduce things like ads, cheaper plans, premium plans, or bundles, and it doesn't have to go find a brand new audience to do it, because everyone's already there.
So if you're just getting started, this is a great place to start. Pick a subscription business you already use yourself, pay attention to how well it keeps its customers, and watch how it grows over time. Once this clicks for you, you'll start spotting it everywhere you look.
