Editor’s Note: In today’s special Daily, we are pleased to welcome back PBRG friend and Exponential Tech Investor Editor Jeff Brown. Below, Jeff shares a simple step you can take to make terrific investment returns—with barely any risk involved…

From Jeff Brown, editor, Exponential Tech Investor: By now, you probably realize there are enormous investment opportunities in future technology.

I believe the world is going to change more in the next 10 years than it’s changed in the past 40 years. The rate of progress will astonish you.

Great change brings great opportunity. Investors in transformational technology stand to make an absolute fortune…

  In order to get the greatest benefit out of investing in small, cutting-edge technology firms, it’s crucial to view your tech holdings just like a billionaire “venture capital” (or “VC”) manager would.

[Venture capitalists fund early-stage businesses. Their goal is to earn stupendous returns when those small firms become huge, like Facebook or biotech giant Gilead Sciences. Both of these firms produced gains of over 10,000% for early investors.]

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Early-stage companies are riskier investments than established firms like Coke or Intel. That’s why the payoffs can be so huge.

But to succeed as an investor in early-stage tech firms, you have to realize a hard fact of life: Not every investment is going to work out.

You’re not going to achieve success on 100% of your “VC-like” investments. You probably won’t even achieve success 75% of the time.

That’s okay.

When you invest like a venture capitalist, you can be right less than half the time… and still make giant returns. The best venture capitalists know that even if less than 25% of their investments work out, they can make a fortune.

When it comes to investing in tiny tech companies, your “win percentage” is relatively unimportant. That’s because the “wins” in early-stage tech aren’t wins of just 25%… or 50%… or even 100%.

When an early-stage tech firm “hits” the magic formula that made Cisco, Dell, and Microsoft so successful, the returns easily go past 1,000%. They can even hit 10,000%… 20,000%… or 50,000%-plus. In the 1990s, Dell gained over 80,000%.

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  Gains in technology can be so astronomical because the best technology is “scalable.” This means that once you create a great technology, it can be replicated and sold all over the world at low costs.

For example, once Facebook hit its winning social media platform, it quickly rolled it out to the rest of the world for relatively low cost. It acquired over a billion users and generated billions in advertising revenue. Facebook is now worth about $300 billion… and it’s still growing.

Or consider Microsoft. Once it designs a good piece of software, it can sell that software millions of times. The production cost of future “units” is tiny.

Early-stage tech firms have incredible potential, but they also have higher failure rates than most sectors. That’s why it’s important to spread your investment dollars around a basket of early-stage ventures. By doing this, you’ll suffer some losers… but you’ll hit some major winners.

When you score big wins in the tech sector, you can be right just half the time and make huge profits. That’s why great venture capitalists spread their risk by taking small stakes in many different companies.

  Some easy math shows how this works. Let’s look at a hypothetical investment example…

On January 1, you buy stakes in 12 different firms. You hold the stakes for three years. The returns of these 12 firms after the three-year holding period are listed below…

Chart

As the table shows, six positions were losers and six positions were winners. That’s a win percentage of just 50%.

But because you hit a few big winners, you made a terrific average return of 108% across the 12 positions. You made this great return while being right just half the time.

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The tiny companies we’re recommending in Exponential Tech Investor have the potential to return you three, five, and—in some cases—more than 10 times your money.

Think like a VC. By sprinkling your VC dollars on a basket of firms, you’ll achieve large returns while taking lower risk.

Reeves’ Note: Jeff’s not some insulated newsletter analyst. He’s a 25-year veteran tech insider CEO… one who’s taken multiple companies public. That might explain how his own VC tech startup win rate is 100%. And now, for the first time ever, he’s set out to help you navigate the coming tech changes in a special training series. Click here to learn more…