Got to this site: http://www.investopedia.com/exam-guide/cfa-level-1/equity-investments/life-cycle-analysis-industry-life-cycle.asp#axzz1neGzCeSa http://www.inv

Got to this site: http://www.investopedia.com/exam-guide/cfa-level-1/equity-investments/life-cycle-analysis-industry-life-cycle.asp#axzz1neGzCeSa http://www.investopedia.com/exam-guide/cfa-level-1/equity-in... This chart is "industry life cycle" so let me apply it to smart phones. There are 4 distinct phases: 1) Pioneering Phase: Back in 2004sh, a number of companies were making barely usable smart phones: (Pocket PC, Palm Treo, Black Berry) 2) Growth Phase: This is where we are now, Apple, Google, Etc. are all building products targeting this market and it is growing like crazy. 3) Mature Growth: This will happen in the next 10 years, (my guess is in the next 5), as the world population who can afford phones is limited and there will be so much product with limited new customers. Companies will still innovate, and sell product, but the growth rate will slow. 4) Stabilization and Deceleration: This will probably happen after people in impoverished nations get cell phones and all Smart phones are driven down in price. (Think current PC market) and who knows what will cause the deceleration? I don't. --Here are the theoretical flows of capital for each phase-- 1) Pioneering = VC, Private Equity money flowing in to businesses 2) Growth Phase = IPO, and Private Equity money flowing in to businesses 3) Mature Growth Phase = Companies start buying back shares, and paying dividends. 4) Stabilization Deceleration Phase = Bankruptcy, Buyouts, continue paying flat dividends etc. What you will notice is that between 2 & 3 share holder money starts getting returned. Growth companies are priced "high relative to current earnings" but "low relative to distant future earnings". Investing in the growth phase is done so that the stock will appreciate as certainty over product success becomes apparent. Once that happens, the stock price will be much higher as the market expects dividends. Apple is a great example of this process.