Megatrends are long-term, transformative changes that affect the world in profound ways. They are driven by technological, social, environmental, and economic forces that shape the future of humanity. Investing in megatrends can offer attractive opportunities for investors who want to capitalize on the growth potential of emerging markets, sectors, and industries.
What are Most Prominent Megatrends
Some of the most prominent megatrends that are expected to have a significant impact on the world in the next decade are:
- Artificial intelligence (AI): AI is the ability of machines to perform tasks that normally require human intelligence, such as reasoning, learning, decision making, and creativity. AI is transforming various industries, such as healthcare, education, manufacturing, entertainment, and finance. According to a report by PwC, AI could contribute up to $15.7 trillion to the global economy by 2030.
- Hydrogen: Hydrogen is a clean and versatile energy carrier that can be used for power generation, transportation, and industrial applications. Hydrogen can be produced from renewable sources, such as solar and wind, and can help reduce greenhouse gas emissions and dependence on fossil fuels. According to a report by Bloomberg NEF, hydrogen could create a $2.5 trillion investment opportunity through 2050 for utilities, equipment makers and others seeking to curb emission intensity.
- Renewables: Renewables are sources of energy that are replenished naturally, such as solar, wind, hydro, biomass, and geothermal. Renewables are becoming more cost-competitive and efficient than conventional sources of energy, such as coal, oil, and gas. Renewables can also provide energy security, environmental benefits, and social benefits. According to a report by the International Renewable Energy Agency, renewables could supply 86% of global electricity and 60% of total energy by 2050.
- Robotics: Robotics is the branch of engineering that deals with the design, construction, operation, and application of robots. Robots are machines that can perform tasks that are difficult, dangerous, or repetitive for humans. Robotics can enhance productivity, quality, safety, and innovation in various sectors, such as manufacturing, agriculture, healthcare, defense, and entertainment.
- Ageing population: Ageing population is the phenomenon of increasing proportion of older people in the total population. Ageing population is caused by declining fertility rates and increasing life expectancy. Ageing population can have significant implications for the economy, society, and health care system. According to a report by the United Nations,
the number of people aged 60 years or over will rise from 1 billion in 2019 to 1.4 billion in 2030 and 2.1 billion in 2050.
How to Invest in Megatrends?
Investing in megatrends can be done through various ways, such as:
- Individual stocks: Investors can buy shares of companies that are directly involved in or benefit from the megatrends. For example, investors can invest in companies that develop or use AI technologies, produce or distribute hydrogen or renewable energy, manufacture or operate robots, or provide products or services for the ageing population.
- Exchange-traded funds (ETFs): Investors can buy ETFs that track the performance of indices or baskets of stocks that are related to the megatrends.
For example, investors can invest in ETFs that focus on AI, hydrogen, renewables, robotics, or ageing population. Learn more about ETF investing here.
- Mutual funds: Investors can buy mutual funds that invest in portfolios of stocks that are selected based on the megatrends. However, investors should bear in mind the higher costs and low chances of outperforming a benchmark index over longer period of time. SPIVA reports regularly provide an update on how active funds have performed compared to their benchmark index.
What Are Some Risks of Investing in Megatrends?
Investing in megatrends can also involve risks and challenges, such as:
- Volatility: Megatrends are subject to fluctuations and uncertainties that can affect their performance and profitability.
- Competition: Megatrends may attract many players who compete for market share and innovation.
- Regulation: Megatrends may require or encounter regulation that could affect their development or deployment.
Below table provides examples of risks and challenges for each megatrend.
Therefore, investors should do their own research, diversify their portfolio, and consult a professional adviser before investing in megatrends.
Disclaimer: The scenarios or investment products presented above should not be construed as investment advice. All investments involve some level of risk, and past performance is never a guarantee of future returns. As always, do your own research in order to validate and better understand the underlying risks.
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