In 1982, John Naisbitt's book "Megatrends - Ten New Directions Transforming Our Lives" popularized the idea of looking at the world and figuring out the main things that were happening and that were likely to happen in the future. More than 25 years later, we can see that a lot of what he wrote was right. We do have massive globalization, a knowledge-based economy and so on. Understanding and acting on such trends is fundamental to long-term investment strategies.

This article takes a look at some of these key (mega) trends and how they are likely to influence the investment landscape over time. There are in fact many such trends, and all have some sort of impact on the financial sector. We will examine a few major and a few minor trends to gain an impression of this broad field and what one can do to benefit from it.

The Aging Society
This is probably the dominant trend and a true megatrend that will influence the financial landscape for decades. In industrialized countries, the age pyramid has changed radically - from a nice triangle with lots of young people and a few elderly, to a bell shape with an alarming number of aged. This means that growth rates in the current top economic nations such as the U.S.A., Germany and France are likely to stagnate or decline. Immigration can counter this aging trend to some extent, but it cannot eradicate the effects.

As far as investment is concerned, this means that industries that care for the aged are likely to flourish, while industries and careers that rely on young people (teaching, for example) are likely to face hard times. Also, developing countries with more traditional age pyramids are growing fast. There will be investment opportunities in the developing countries, not just in the obvious cases of China and India, but in all sorts of places in Asia, South America and even Africa as these countries continue to industrialize. (Find out how factors such as a country's age group can affect your investments in Demographic Trends And The Implications For Investments.)

The Battle for Resources and Raw Materials
The combination of population and economic growth in the "tiger" regions (Southeast Asia) must use up resources, which is likely to increase demand - and prices - for energy, food, water and just about anything else needed to keep these young economic powerhouses operating.

Any well-constructed and managed portfolio will take advantage of such trends. This could be accomplished by putting some money into resource-based investments and funds.

Climate Change
Climatic change and carbon dioxide emissions are ugly problems that seem to be with us to stay. If the polar ice caps continue to melt as many scientists predict, sea levels are likely to rise and storms may increase in frequency and severity. Although these events present a serious global challenge, investing in the solutions can be both philanthropic and lucrative. (To learn more, read Evaluating Green Equity Investments and Top 10 Green Industries.)

No one really knows exactly how the climatic situation will develop, and it is important not to assume either that a total disaster is pending or that everything will be just fine. In terms of investment, however, it is clear that how environmental issues are handled by companies will impact the future. Putting this simply, firms, products and services that are environmentally friendly, should, other things being equal, present better opportunities than polluters. And products providing wind or solar power, or other forms of alternative energy are likely to have a bright future. (For more insight, see For Companies, Green Is The New Black and Five Companies Leading The Green Charge.)

The 21st Century Is Asiatic
Naisbitt advised people to forget about countries and focus on regions. Indeed, many investors now work more in terms of international industry sectors, such as steel or pharmaceuticals, rather than countries.

Countries will still remain important, but investors may find it prudent to invest more than before in areas that are growing particularly rapidly. Alternatively, American companies that themselves have become more globalized, may benefit.

Further Trends: Mega and Not So Mega
There is no shortage of other trends that will influence our lives - and our money. For instance, international terrorism acts cost money to counter. Billions have been spent in this area and, unfortunately, it appears to be a trend that will not be going away any time soon.

Values also evolve over time. For instance, in 2007, many technology publications indicated that people are developing a desire for simplicity. As such, products and services that cater to such needs and preferences may become important. As technology becomes an essential part of communication so does making it more user friendly. After all, many people are driven to distraction by having to learn complicated new software applications and how to work intricate new gadgets every few months.

Mobility is also likely to continue to advance and progress and goods and services, as well as people, will move around.

And then there are mutating life models, an evolving working world and consumer patterns, microtechnology and also an increasing number of derivatives in the financial world. All in all, there are trends galore.

How Reliably Can One Predict These Trends?
Despite the above, the future cannot be predicted accurately, at least not in all respects. There are so many considerations, elements and unknowns that one cannot take anything for granted. Nonetheless, it is necessary to be aware of trends and take them into account in your investment strategy. And - if you look closely - it's possible to get a pretty good idea of how many will develop.

What is less certain than the trends themselves is how exactly they will develop and interact with one another. Yet, it is certainly possible to draw some sensible conclusions about likely impacts on investment and what best to do with one's money. Truly reliable and accurate predictions, on which you can put the proverbial bottom dollar, are not in the cards. The prudent approach is to keep as informed as possible on the various trends and be guided by your knowledge - within the constraints of the standard wisdom on investment. (For more on investing using a more traditional approach, check out Advanced Financial Statement Analysis.)

Conclusions
The world is evolving constantly and partly in the form of various mega, middling and minor trends. While it is essential to be aware of and act on these trends, the sheer number of them and their complex and ever-changing interaction prevents any analysis from being smooth sailing. The trends can be your friends, but which ones and to what extent?

The bottom line is that you should bear the trend landscape in mind, but don't take wild risks on a future that ultimately remains uncertain.

(To read more on this topic, see Taking Global Macro Trends To The Bank.)

Related Articles
  1. Fundamental Analysis

    Will Health Care Continue to Drive IPOs in 2016?

    Learn why health care IPOs may be slowing in 2016, and how Obamacare, poor previous filings and economic factors are affecting the health care sector.
  2. Your Practice

    What the Next Decade Holds for Financial Advisors

    A look at the top trends of the financial advisory business in the next decade.
  3. Active Trading Fundamentals

    4 Stocks With Bullish Head and Shoulders Patterns for 2016 (PG, ETR)

    Discover analyses of the top four stocks with bullish head and shoulders patterns forming in 2016, and learn the prices at which they should be considered.
  4. Chart Advisor

    Uptrending Stocks Dwindle, a Few Remain (EW, WEC, WR)

    The number of uptrending stocks is shrinking, but here a few that remain in uptrends.
  5. Investing Basics

    How liquid are Fidelity mutual funds?

    Review the liquidity features of mutual fund shares and an overview of Fidelity mutual funds. Most investors look for convenient access to their investments.
  6. Chart Advisor

    Trade Setups Based on Descending Trend Channels (LBTYK, RRC)

    These descending trend channels have provided reliable sell signals in the past, and are giving the signal again.
  7. Sectors

    3 Cyclical Industries To Exploit in 2016

    Learn about the three industries at the down end of their business cycles, and discover how these industries may improve in years to come.
  8. Chart Advisor

    How Are You Trading The Breakdown In Growth Stocks? (VOOG, IWF)

    Based on the charts of these two ETFs, bearish traders will start turning their attention to growth stocks.
  9. Chart Advisor

    Watch This ETF For Signs Of A Reversal (BCX)

    Trying to determine if the commodity markets are ready for a bounce? Take a look at the analysis of this ETF to find out if now is the time to buy.
  10. Stock Analysis

    If You Had Invested Right After Berkshire Hathaway's IPO (BRK.A)

    Learn how much you would now have if you had invested right after Berkshire Hathaway's IPO, and find out the classes of shares that you could invest in.
RELATED FAQS
  1. What is finance?

    "Finance" is a broad term that describes two related activities: the study of how money is managed and the actual process ... Read Full Answer >>
  2. What is the 'Rule of 72'?

    The 'Rule of 72' is a simplified way to determine how long an investment will take to double, given a fixed annual rate of ... Read Full Answer >>
  3. What is a stock split? Why do stocks split?

    All publicly-traded companies have a set number of shares that are outstanding on the stock market. A stock split is a decision ... Read Full Answer >>
  4. How do I place an order to buy or sell shares?

    It is easy to get started buying and selling stocks, especially with the advancements in online trading since the turn of ... Read Full Answer >>
  5. Is there a difference between financial spread betting and arbitrage? (AAPL, NFLX)

    Financial spread betting is a type of speculation that involves a highly leveraged derivative product, whereas arbitrage ... Read Full Answer >>
  6. What does a high turnover ratio signify for an investment fund? (KNOW)

    If an investment fund has a high turnover ratio, it indicates it replaces most or all of its holdings over a one-year period. ... Read Full Answer >>
Hot Definitions
  1. Harry Potter Stock Index

    A collection of stocks from companies related to the "Harry Potter" series franchise. Created by StockPickr, this index seeks ...
  2. Liquidation Margin

    Liquidation margin refers to the value of all of the equity positions in a margin account. If an investor or trader holds ...
  3. Black Swan

    An event or occurrence that deviates beyond what is normally expected of a situation and that would be extremely difficult ...
  4. Inverted Yield Curve

    An interest rate environment in which long-term debt instruments have a lower yield than short-term debt instruments of the ...
  5. Socially Responsible Investment - SRI

    An investment that is considered socially responsible because of the nature of the business the company conducts. Common ...
Trading Center