Building your portfolio can feel like a daunting task in today’s turbulent world. Global war, energy instability, and disruptions to supply chains have rocked reliable markets and revised investors’ understanding of safe investments.
However, the recent turbulence of some markets means that exciting opportunities have emerged in new industries. This is great news if you’re an investor and are looking for investment options that will support your portfolio for years to come.
Investing in emerging industries can help fund the kind of changes that you want to see in the world, too. While you do not necessarily need to align your investments with your interests, funding markets that are appealing and interesting to you will ensure that you’re up to date with trends while diversifying your portfolio.
Diversifying Your Portfolio
Building a diverse portfolio is a surefire way to spread risk and increase your chances of making gains. Put simply, when you have investments in multiple industries and markets, you are less likely to be hampered by poor performance and can offset any losses that you incur. This is crucial for your long-term financial goals, as a diverse portfolio will guard you against unsystematic risk.
A diverse portfolio can protect you against inflation, too. Inflation, which negatively impacts your purchasing power, usually occurs during times of economic instability. Diverse portfolios can protect you against some of this risk by offering you the chance to invest in multiple different markets. Diversifying your portfolio doesn’t necessarily mean that you’ll see declining returns, either, as you can choose to invest in more high-risk emerging markets.
Experts at major financial institutions suggest a 60/40 split between stocks and fixed-rate assets like bonds. The way you approach this 60/40 split is largely dependent on your own financial situation and income bracket. If you are financially secure and have more than enough emergency savings, investing in emerging industries may be the best option for you.
Understanding Market Forces
Finding success as an investor requires that you understand market forces so you can adapt quickly to new trends. Before you commit your money to emerging industries, you will need to account for market forces like:
- Government: How will interest rates and policy changes affect the industry you are hoping to invest in? Do experts expect tariffs to be enforced soon?
- Speculation: Emerging industries are built on speculative assessments of future value. How will fluctuations like seasonal changes and economic indicators affect the expectations and stock prices associated with your proposed investment?
- Supply and Demand: Supply and demand principles are at the core of all successful businesses. These principles have a pull-push impact on stock prices, too. If stock becomes in heavy demand quickly, you need to know whether or not you want to invest yourself.
Understanding market forces gives you a deeper understanding of prospective markets and may improve your ability to invest successfully. Rather than leaping into enticing emerging industries, do your homework to learn more about how the government is regulating the industry and what current investors are saying about the future of the market.
When researching emerging markets, resist the temptation to draw from unreliable investment advice. Instead, tap into the knowledge of established institutions like HSBC, JP Morgan, or a financial planner via the National Association of Personal Finance Advisors.
These industry-leading institutions won’t always be right, but they do invest millions of dollars into understanding emerging markets for the benefit of investors. They strive to answer critical questions — e.g. “How will emerging markets react to the end of Fed hikes” and “Will COP28 deliver on climate change goals” — meaning that you can tap into their wealth of knowledge and get up to speed on market forces quickly.
Renewables
The renewable energy industry has grown rapidly in the past decade. Today, federal grants and tax credits are increasing investment into sub-sectors like the solar industry and are bolstering dividends for renewable energy investors.
Reports from the Carbon Collective show that renewables have outperformed fossil fuels over the past 10 years, too. Moreover, you can rest easy knowing that your investments matter and are helping the world become more sustainable. Additionally, it’s likely that renewable energy will grow over the next decade as increased adoption of wind, solar, and hydropower will fill more of our energy needs.
If traditional renewable stocks don’t have enough potential for you, consider investing in renewable-adjacent industries that have higher risk but may yield better dividends. Consider, for example, fuel-cell stocks, green utility investment, or emergent tech like wave energy tools that capture the kinetic energy of the ocean.
This form of investment can be particularly powerful if you are a millennial looking to invest in a cause that you care about and will benefit from in your lifetime. You can partner investments in renewables with more reliable investment strategies offered by wealth-building apps like Acorns, Chime, and ELSS. This will diversify your portfolio and help you build wealth over the coming years.
Tech
The influence of tech companies is growing in global markets. This is good news if you’re interested in exploring emerging opportunities and have a good understanding of upcoming tech trends. Currently, you can tap into fast-growing markets like:
- Artificial intelligence;
- Cloud computing;
- Blockchain and cybersecurity;
- Robotics and the IoT;
- Quantum computing.
These tech-based industries show strong signs of growth and have a lot of potential to expand. This can offer a great way to spread risk and increase your returns. Powerful tech tools like AI computing will be utilized in stable industries like insurance and healthcare for years to come, too. This can be a real boon if you have the wealth to explore emerging markets and want to put your money into a market that is poised to grow over a number of years.
Conclusion
Understanding emerging industries is crucial if you want to make the most of your investments. Setting aside some funds for fast-growing industries can help you overcome inflation and protect the value of your wealth, too. Additionally, many emerging industries, like renewables, offer social benefits. This can ease your mind and help you feel good about the influence that your investment capital is having on the wider world.
⸻ Author Bio ⸻
Sam Bowman enjoys writing about people, tech, business, and how they merge. He enjoys getting to utilize the internet for the community without actually having to leave his house. In his spare time, he likes running, reading, and combining the two in a run to his local bookstore.
