"If I had a crystal ball..."; a phrase regularly uttered by investment professionals. It usually comes after a client, friend or family member requests some insight into the future: "Should I put some more shares at the moment?"; "I'm going overseas in 6 months. Should I buy my $US now or later?"; "When's this property bubble gonna burst?".
There is an inherent difference between investing and trading; between the investor and the trader: Time. Though price is important to both investors and traders alike, the former has a focus on long term objectives, whereas the latter lives in the short term. And with that hunt for quicker gains, the trader might be able to take more advantage of fleeting opportunities more than the investor, who is trying not to get caught up in the noise of the day.
However, the world is constantly evolving, and even traders are wise enough to sometimes check the bigger picture. Any trader or investor who doesn't have an understanding of industries that are dying versus industries that are just starting up risks allocating their resources to a corporate dinosaur just in time for the meteor to hit.
Many industries and companies have died out as the world has evolved and technology has expanded. A well-used example of a company which failed to keep up with progress is that of Kodak. By 1996, it was the fifth most valuable brand in the world and worth over US$31bn. 16 years later, Kodak was bankrupt. What went wrong? The company failed to plan adequately for the future and was not able to keep up with more nimble entrants into the photography equipment industry.
With the speed of technological advancement, there are many industries that are in their infancy and could grow significantly over the coming years. Some of these include:
- Biotech - genetics, longevity
- Energy - solar, fusion
- Automation/AI - domestic robots, driverless transport
Picking winners for the future may seem easy, but what about industries on the way out. In the Star Trek episode "The Neutral Zone", Captain Picard is in a conversation with a recently thawed and wealthy financier from the 20th century. Now over 300 years later, the banker is keen to see what has become of all his money and assets, hoping that 300 years of interest has left him in good stead. However, to his dismay and horror, he learns that things are different now. Money no longer exists:
"People are no longer obsessed with the accumulation of things. We've eliminated hunger, want, the need for possessions. We've grown out of our infancy." (Captain Picard).
Yes, no money means no banks. Can anyone imagine a world without banks? And yes, no industry is immune to the march of technology.
Investing for the extreme long-term is probably unwise for most investors. But an eye on the horizon is always a good idea, especially if you want to make sure you don't get stuck in troubled waters.
LBW Wealth Management is an Authorised Representative of Wealthsure Financial Services Pty Limited AFSL 326450
This article has been prepared by LBW's investment committee based on its understanding of current regulatory requirements and laws. It is not considered advice and provides general information pertaining to our ideology surrounding future asset allocation strategies. It does not take into account each client's individual objectives, financial situation or needs. If you would like to know how LBW's understanding of the current environment impacts on your portfolio please contact a Financial Adviser and to discuss your options or before making an investment decisions.
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