With the right strategy, megatrends can be sound long-term investments
Not every technological breakthrough is worth betting on. Google Glass. The metaverse hype cycle. Countless innovations that arrived with fanfare have faded fast. So how can investors tap into trends that have the best chance of going the distance?
Billy Leung, a senior investment strategist with the exchange-traded fund (ETF) provider Global X, says: “Whenever we look at structural themes, there are going to be three key pillars.” To be sustainable as a long-term investment, an emerging trend must satisfy all three: it must involve a major technological breakthrough, a major demographic change, and a major environmental or regulatory change, Leung says. Miss one, and what looks revolutionary may turn out to be a ripple.
Leung cites the PC boom of the 1970s and 80s as an example. The breakthrough was Intel’s 8086 chip, which simultaneously made machines more powerful and much smaller. At the same time, in the US the Bayh-Dole Act allowed private companies to own intellectual property they had developed with the support of government funding rather than surrendering it to the government. “That act allowed private companies to develop new technology and to actually own it,” Leung says. “So they were more incentivised to invest in new innovation.”
