Editor's note: Finding the developing companies that will shape and contribute to society is one way to be a successful investor...

But there's more to it than just discovering them. You have to look ahead and understand the end goal of what the company is doing and the road map that will lead it there. That's according to Stansberry Venture Technology editor Dave Lashmet.

In today's Masters Series, last published in the May 30 issue of the free DailyWealth e-letter, Dave explains how ignoring the noise and focusing on the value companies provide can aid you in investing successfully in technology...

How to Invest in Tech With the End Goal in Mind

By Dave Lashmet, editor, Stansberry Venture Technology

Today, I want to introduce you to the concept of "proactive investing."

Don't bother Googling it – it's not a long-standing school of investing. I made it up. But I believe it's a useful mindset for all new technology investors...

You see, there's a clear difference between trading and investing. Trading means buying a trend – or better yet, getting ahead of a trend. It's tied to money flow in a broader market, sector, fund, or stock.

But even high-flying momentum stocks can fall back to earth. Of course, with the right plan and execution, you can be a successful trader... You just have to understand how it's different from long-term investing. And you need to know which of the two you're doing.

So, how do you invest for the future? Rather than worry about what other investors are up to, I try to consider what the equity is up to. This is especially important in tech investing.

Here's an example to show you what I mean...

In the summer of 2020, my family found a 5-acre plot of trees in Washington state. It's 100 feet above sea level and only five minutes from the fast ferry to Seattle. It's flat land at the top of a hill, with no creek or swamp in sight. It's the perfect place to build a country home.

We set out to put in a road... then a writer's cabin, a well, and a septic field. We planned to eventually turn the cabin into a small home. And we estimated the whole project would take about four years and $400,000.

Of course, when you begin a project like this, you can't know the exact resale value four years from now... or the precise day you'll finish... or even how much it'll actually cost. But every step brings you closer to a tangible goal. One day, there's a foundation. The next, there's a roof.

In our case, our market research suggested that, eventually, this would be an elite residence... And we'd be able to sell it for a pretty penny to some tech executive who only needed to go into Seattle once a week.

We wouldn't even have to finish the building project to see a return on our investment. There'd be added value at every stopping point in the process. Even with the house unfinished, each of the other fixed assets – the land, road, cabin, well house, and septic field – would be valuable and could help someone else finish the job we'd started.

Similarly, when you're a proactive investor, you have to see the end goal and all the steps it takes to get there. That's because the process itself has value – even if the wisdom of many investment advisers is that "the future is risky, so just live in the moment."

When you think of evaluating how companies use their cash to invest in future growth, maybe your first thought is to look at research and development (R&D) costs. The problem is, U.S. accounting rules treat R&D costs as current losses.

A better approach might be to follow Sweden's example... and treat R&D costs like investments.

For the best tech companies, putting $100,000 a year into R&D for four years is a lot like my real estate investment... It's building something that will unlock value in the years to come.

A company might use this cash to invest in unique technologies that its peers can't match. Or it could make itself independent by developing its own manufacturing capacity, while its rivals are forced to pay higher and higher prices to compete with each other in the manufacturing chain.

Tech investors would do well to understand Sweden's approach to R&D. The value of a company isn't based on last quarter's sales – because those sales can't tell you much about what the business will look like next year... or four years from now.

Instead, look at what a company is building right now. From there, you can weigh future demand, do a competitive analysis, then predict the value of a forthcoming product and how that adds to cash flow.

We like to look at free cash flow ("FCF") because it's the number that doesn't lie...

FCF is what a company has left over for dividends and buybacks after everything else is paid. That's how the company pays you, the firm's part-owner.

Note, all of this is unaffected by the trends in the market. Rather, it's about what the asset can be worth to you – measured against both what it costs to acquire it and the cost of holding on to it.

We can use this "proactive investing" logic with companies of any size... whether we're looking at small firms or larger, more established technology companies with a long history of profits, as well as proven marketing skills, demand, and an ability to hold off competitors.

In short, if you want to invest in tech, look for companies that are building things of value in the present... for a lasting competitive advantage. That's the best way to successfully invest for the future.

Good investing,

Dave Lashmet

Editor's note: Dave has found some of our firm's most profitable research, with subscribers having nearly 50 different chances to double, triple, or 10X their money. Now he has found another opportunity for investors to take advantage of. While everyone is focused on the SpaceX IPO, there's a smaller, lesser-known company that's poised to make those who get in early rich.

This is all part of Dave's final public presentation, where he's sharing what he believes is the best company to put your money to work during the SpaceX craze. Click here for the full details.