Experienced investors often have a long-term view of the stock market, using short- and medium-term volatility to buy those assets that they think will materialize over the years. While it is difficult to identify these trends, it is possible.
Below we’ve highlighted five of the most popular trends right now that show tremendous upside potential.
In addition to cryptocurrency trading, retail investors can participate in the expansion of blockchain, a technology that supports digital coins such as Bitcoin and Etherium.
Blockchain is essentially a sequence of information or “blocks” recorded on independent computers and shared in a distributed network. Each block of data is frozen in time in an open registry for all participants to access. This feature makes blockchain technology especially useful in industries where security is paramount, such as banking.
By linking data and making it accessible to everyone, blockchain eliminates the risk of foul play on one side. It also simplifies and automates processes that may previously have been inefficient.
For example, Walmart (WMT) and Sam’s Club are using blockchain to combat foodborne illness. By requiring their suppliers to upload source and logistics data in real time, they can improve traceability, ensuring food safety in the event of a disease outbreak at one of their suppliers.
Other well-known corporations using blockchain technology include Microsoft (MSFT), General Electric (GE), PayPal (PYPL), Starbucks (SBUX), Salesforce (CRM) and IBM (IBM).
2. Electric vehicles.
The electric car industry is undergoing a massive transformation that could bring billions to the global economy. To date, almost all major automakers have announced plans to increase the availability of electric vehicles, with some, such as Jaguar and Volvo, planning to phase out gas-powered cars entirely within the next decade.
By 2030, the International Energy Agency (IEA) predicts that there could be 145 million electric cars on the road, up from 10 million today, an increase of more than 1,300 percent.
To prepare for rising demand, most major automakers have pledged to meet electrification goals in the coming years by reconfiguring their production lines to produce more electric vehicles.
Ford (F), for example, says it plans to invest $30 billion in electrification efforts by 2025, promising that 100 percent of its passenger cars in Europe will have zero emissions by mid-2026 and switch to all-electric by 2030. By then, the company expects 40 percent of its global sales to be fully electric.
From electric vehicle manufacturers such as Tesla (TSLA) and NIO (NIO), to semiconductor manufacturers such as NVIDIA (NVDA) and Intel (INTC), to cloud service providers such as Microsoft (MSFT) and Amazon (AMZN), many of these companies will grow to drive vehicle safety and efficiency in the electric vehicle market.
3. Artificial intelligence.
The technological revolution has brought artificial intelligence (AI) to the forefront of society, making a reality that could only be dreamed of before. As AI is embedded in every aspect of our lives, the new technologies may become the most influential industry of the century.
At its core, AI attempts to replicate human intelligence in a computer or machine with greater speed and greater accuracy. As these systems become more intelligent, AI is becoming more powerful, and its uses and applications are affecting nearly every industry.
Analysts at International Data Corporation (IDC), a market intelligence provider, predict the global AI market could exceed $500 billion in revenue by 2024, a compounded five-year growth rate of 17.5 percent.
AI is everywhere. Whether it’s Apple (AAPL) using facial recognition software to unlock iPhones, or Samsung creating smart devices like refrigerators and washing machines, or robo-advisors using automated algorithms to optimize investments, technology isn’t going anywhere.
For most retail investors, chances are you’re already familiar with AI, as many large U.S. public companies are either already using it or are actively seeking to invest in the technology. But for those looking for more direct exposure, some notable companies are Intuitive Surgical (ISRG), Upstart Holdings (UPST), Intel (INTC), Trimble (TRMB) and Brooks Automation (BRKS).
4. Real Estate
Statistics show that real estate is the most preferred long-term investment by Americans. And there’s a reason for all of this. Investors have historically favored real estate because of its diversification characteristics because these investments have a low correlation with stocks or bonds.
But for those interested in accessing real estate without tying up their capital with a large down payment, there is an alternative: real estate investment trusts (REITs) .
REITs mainly invest in a range of properties, such as residential apartments, office buildings, hospitals, data centers, hotels, retail stores and so on. In addition, the companies that support these activities, such as financial lenders and management companies, are also part of the group.
To qualify as a REIT, corporations must distribute at least 90 percent of their taxable income as dividends, making dividend yields essential to investing in these funds. REITs also serve as a tool to diversify investors’ portfolios because they are less correlated with other asset classes, such as stocks.
Some examples of popular REITs include American Tower Corporation (AMT), Prologis (PLD), Crown Castle (CCI), Public Storage (PSA) and Simon Property Group (SPG).
5. Investing in ESG.
The disruption and uncertainty caused by the global pandemic has sparked renewed investor, consumer and employee interest in those corporations that prioritize environmental, social and governance (ESG) issues. Beyond profit, these organizations are taking a long-term view of how they do business.
And that choice is paying off. Global demand for sustainable investments in 2021 will be a record year, surpassing nearly $2 trillion.
In addition to creating value through sustainable practices, the stocks of these corporations tend to be more sustainable than their competitors.
For example, a Bank of America study shows that stocks of corporations with solid ESG practices tend to be less volatile, have higher three-year returns and are less likely to declare bankruptcy.
One way to invest in socially responsible companies is through exchange-traded funds like the iShares MSCI USA ESG Select ETF (SUSA), which tracks an index of highly rated ESG companies. Some of these names include American Express (AXP), Accenture (ACN), Disney (DIS), Home Depot (HD) and Hasbro (HAS).
Target organizations help set the pace for a better future. By focusing their efforts on reducing carbon emissions, minimizing waste, addressing social issues, promoting equity, fairness and inclusion, and so on, these corporations are redefining the role of business in society.