There are three certainties in life: Death, taxes, and change.
We live in a world that is constantly evolving. It is difficult to comprehend how much everything has changed since we were kids ourselves. We almost cease to think what it must have been like for our parents growing up.
Now, ask the same question about your grandparents: How did they spend their time and energy in a world so devoid of globalisation and technology?
It gives me goosebumps to ponder how far we have come as a society in the last 200 or so years.
So much has changed, and yet the advancement of knowledge and technology is set to continue at a faster rate than ever before.
We do not have a crystal ball that provides a clear picture of the future. However, we can look at trends in order to make informed decisions on where the world is heading.
Source: Pixabay
What is a megatrend?
A megatrend is not to be confused with the latest fad.
It is a transformative global force. It will shape and define business, culture, and our personal lives on a big scale.
The average investor understands that a megatrend may pose unforeseeable risks and challenges — but the smart investor knows that countless opportunities arise out of disruptive innovation.
Here are several megatrends to look out for…
The rise of technology and hyperconnectivity
Technology has become more then a part of our lives. It has become a part of us.
The Cisco AIR has predicted that there are going to be 29.3 billion networked devices in the world by 2023. By contrast, there were only 18.4 billion devices in 2018. This really puts things into perspective, doesn’t it?
Breakthroughs in technology continue to happen every day. Entirely new industries are built upon them.
As a result of the Covid-19 outbreak, humanity will continue to push the envelope, increasing the rate of digitisation and virtualisation within our businesses and society.
During the lockdowns, people had to rely on different forms of communication. I would take a bet that you have used Zoom [NASDAQ:ZM]. They were quick to innovate and thus found great success during this trying time, while many others were failing to adapt.
The biggest question to ask is this: ‘Where to from here?’
Technology is a large field, so it is important to find the trends and leading companies that are going to thrive in the long-term.
Artificial intelligence (AI) is now the future. Fidelity Equity research analyst and fund manager Adam Benjamin believes that AI may grow to become one of the most significant long-term technology trends.
AI is already making waves in our day-to-day lives, with image and speech recognition, electronic navigation, ride-sharing, and more. Experts believe that we are only scratching the surface on what AI has to offer in the future.
5G is the next generation of wireless technology. Speeds can range up to 100 times faster than the current 4G wireless. In a world where our standards for convenience continue to be tested, it isn’t hard to see that 5G is the future.
China plans to add hundreds of thousands of 5G base stations, while United States plans to transition fully in 2023.
With 5G still being in the early stages, this may provide a ripe opportunity for investment. Exposure can be met through investments in mobile networks such as Verizon [NYSE:VZ] — or other companies providing related infrastructure and research.
Cybersecurity has been around for a long time. This does not mean that it has stopped trending. As computers continue to evolve, cybersecurity will continue to evolve as well.
Cybersecurity jobs are growing three times faster than other tech jobs. Sales on related products and services are also set to hit $150 billion this year. A huge bump that is attributed in part to the influx of individuals relying on technology for work and play during Covid.
The continual risk of hackers and malicious intent online has created an industry that is heavily relied on to stay one step ahead of the competition. It is expected that demand for these companies are going to grow in the next decade. The opportunities for investment will continue to arise.
Climate change and resource scarcity
There is growing concern about the state of the planet.
While we have a lot of ground to cover in our bid to solve this complex issue, we can find solace in the fact that a lot of people are starting to take notice.
Millennials and Gen Z are likely to be more sustainably-oriented then other generations. This eco-awareness is a step towards a more sustainable future.
This is reflected in consumer buying habits over the last few years. People are more aware and conscious of where they get their products from.
Are they recyclable? Ethically sourced? Vegan?
Organisations now spend a lot of time and money to pay towards these environmental concerns.
It is not enough to simply say they support a cause. Consumers now expect active steps to be taken in order to ensure that company and client values remain congruent. This has been proven in many cases to increase customer satisfaction, stakeholder benefits, as well as corporate profits.
This has been especially true over the Covid-19 pandemic. Data has shown that the focus on sustainability has accelerated. It shows no sign of stopping.
Sustainability is now a megatrend to consider when making your next investment decision.
I have identified several areas of interest that may boom.
Renewable energy is the future of electricity generation. This area has created a growing number of investment opportunities in a world that is striving to reduce fossil fuel emissions.
Hydro, wind, and solar are among the largest sources of this green power. With many companies and funds to choose from, it’s easy to gain exposure to this growing trend.
Water is undoubtedly one of the most important natural resources that we have. It is a commodity that will never cease to have demand, and unfortunately, there are fears that we are running out.
Any investor with a concern for the scarcity of water may wish to add related assets to their portfolio.
This can be achieved through picking stocks that collect, purify, and distribute water — or by investing in a water-based mutual fund.
Green transportation is another product of the sustainability trend that you have doubtless seen for yourself.
Whether it was an e-scooter zooming past you on the footpath, or an electric car overtaking you on the highway, these silent transporters are here to stay.
While the first automaker likely to come to your mind is Tesla [NASDAQ:TSLA], many other companies also want a slice of this profitable new trend.
Analysts at UBS investment bank forecast that 25% of new cars sold in 2025 will be all-electric. By 2040, virtually every car sold will be electric. This probably extends to other forms of transport, such as planes.
Interested investors can gain exposure to this market by investing in vehicle manufacturers, as well as supporting companies such as battery and mining companies.
Conclusion
The ability to identify and understand trends will provide the investor with a greater insight when making important investment decisions for the future.
However, they are not without their risks.
- Rising interest rates may be bad news for growth-oriented tech stocks. An increase in rates will affect companies with high valuations, as higher rates mean future earnings are worth less today. This may cause investors to sell off their expensive tech stocks in exchange for cheaper value stocks.
- Secondly, tech is a competitive field with little to no barriers to entry. Companies are at risk if they do not adapt appropriately with varying market conditions. Who will stand the test of time? Only those with a competitive advantage, with a fierce drive to innovate.
Nonetheless, the fact is that most organisations will not be able to ignore megatrends. They will continue to shape and influence our lives for years to come.
While they may pose many challenges, they will continue to birth infinite opportunities for investment.
Just think about our recent past.
Most saw 2008 as a year of financial crisis. But let’s remind ourselves that incredibly influential innovations such as the Internet of Things, the retail DNA test, and solid-state flash drives gained popularity during this turbulent time.
Only the most intelligent investors saw these megatrends evolve — and benefited hugely from them.
Now, as we look towards the future, our Quantum Wealth Report is preparing subscribers for the next leap forward.
Regards,
Samael Knaap
Analyst, Wealth Morning
(This article is general in nature and should not be construed as any financial or investment advice. To obtain guidance for your specific situation, please seek independent financial advice.)
Sam is an intern analyst at Wealth Morning. He is currently completing his major in finance, while juggling his roles as President of the Massey University Investment Club and student fund manager. He won the Investment Club stock challenge, where he achieved a return of 44% over a 3-month period. Furthermore, he has received the INFINZ scholarship award for being the top 3rd year finance student in 2020. His role involves contributing research and writing financial reports for Wealth Morning’s readers.