Gun sales are higher than they have ever been in recent history. If you are an entrepreneur, you may think that guns are a great investment. However, the gun industry is extremely volatile and investors must follow trends closely to have a shot at getting a profit. Investors with good timing could make a great deal of money by selling and trading guns, but guns may not be a long-term buy-and-hold investment.
Colt, one of the biggest players in the U.S. gun industry, recently filed for bankruptcy. This has left potential investors leery of the industry. Unlike most products, guns are not as affected by normal economic cycles; instead public opinion and politics can drastically affect gun sales.
For example, panic has been a powerful driver of gun sales in the past. After the tragedy at Sandy Hook Elementary School, gun sales shot through the roof as gun owners feared the arrival of stringent gun legislation. The threat of terrorist attacks and events occurring in the Middle East, have also caused a surge in gun purchases as some feel the need to protect themselves. On the flip side, mass shootings can also motivate gun legislation on a local level that can put additional restrictions on gun sales that can affect the profits of investors.
So what is an investor to do? Before jumping on the gun train, understand that the gun industry is extremely volatile and is all about timing. Investors must follow political and social events to know the right time to buy and sell. Investing right after a public threat could be a good idea as many people will want to arm themselves. But trying to invest in the gun industry as a long-term hold could be dicey.
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