Investing in market themes can be rewarding, is not new, and can be difficult to ‘get into’ at times. But don’t be distressed with a FOMO1 event: alongside thematics are complementary investments that can be equally rewarding. There are a few major investment themes working through the markets at the present time. No doubt you will have heard of them but are you confident you are invested in them?
(1 FOMO, is the ‘Fear of Missing Out’)
The big equities market news recently has been AI (artificial intelligence). In recent years there has been a lot of market hype around the crypto-currency, Bitcoin.
In the early stages of new market darlings, volatility is often a deterrent for strategic investors. Bitcoin has been quite extreme on that front, but it is not the only ‘token’ traded as crypto-currency. However, it is a prominent survivor and may be with us for some time to come. Some others have fallen by the wayside – and this is not uncommon in the development of new market themes.
Whilst AI has recently come into prominence, it has been known under previous iterations for some years. You will be familiar with the terms ‘machine learning’, cloud storage, and ‘data analytics’. These processes were steps along the way to the development of ‘artificial intelligence’. In recent reporting periods, a reference to AI in company reports has added value to that stock in market trading. With the companies that are foremost in the AI race, you would have to think it is a technology with a future. Companies such as Microsoft, Amazon, Alphabet (call us Google), and Meta (call us Facebook) are the leaders in this area.
Analysing these big market themes can guide construction of a diversified strategic portfolio.
Crypto-currency relies on blockchain technology, but utilises data mining. Two things we know about data analytics are –
- A huge amount of computing power is required; and
- It is very energy consumptive.
Computing power is provided in the humble micro-chip: think names such as Intel and Nvidia. Energy comes from a range of generative sources but requires transmission and distribution (infrastructure). And so you can see that there are investment options that arise from servicing that resource. Whilst you may resist investing in a volatile product like crypto-currency, investing in derivative entities may be more palatable. And it may well be the case that your portfolio already includes these investments.
Artificial Intelligence also relies heavily on computing power. The server banks supporting this technology are extremely energy consumptive. They are so reliant on energy that micro power generation systems are being developed adjacent to the server bank sites. These generators need to reliably produce power 24 hours per day: neither wind nor solar is satisfactory. The door then is open for hydrogen, nuclear or other reliable sources of power. A company recently featured on Bloomberg TV, OKLO, is developing small scale, highly efficient nuclear power generators for such deployment.
Just following the support trails of these two current market darlings, we can see that investments that can benefit, include –
- Micro chip manufacturers
- Energy producers
- Infrastructure (poles and wires?)
- Construction – and even
- Financial services (lending; seed capital)
Where to from here?
We have dealt with only two of the recent high profile investment darlings. There are many others that we sometimes only see when there is an industry decline. By looking at these matters more closely you will be able to develop a range of industries that are/ will benefit from the activity of another. A simple example is a holiday cruise: for that to be enjoyable and sustainable, support is drawn from –
- Ship operations (captain and officers, engineers, deck hands, safe vessels, reliable engines, power and technology etc)
- Transport industries (airlines, coach companies, car hire/ share ride services etc)
- Catering requirements (fresh meats, fruit and vegetables, other consumables, cooking facilities and power, kitchen staff etc)
- Service attendants (ship crew, entertainers, porters, medical teams, cabin attendants etc)
- Entertainment and technology (live and recorded performances/ performers, comfortable lounges, ushers, drinks etc)
- ..and so on it goes.
When looking for the next big thing to invest in, consider the powering, infrastructure, technology and resources that need to be harnessed to make it work. Linking some common threads you will see themes for investing that will be rewarding, yet mundane to some.
Building your investment portfolio
Investors have options as to how to place their money. There are some key issues when developing an investment strategy. Awareness of your investor risk profile, your likely need for liquidity in the relatively near term, and your optimum timeframe are paramount. Your investment preferences – such as in particular themes – are secondary, but in no sense, unimportant.
The experienced financial advisers at Continuum Financial Planners Pty Ltd can work with you to develop an appropriate investment portfolio. One that is personally risk-loaded, diverse – including preferred investments, offset in the risk profile with appropriate other investment classes.
To meet with one of the team, call our office (on 07-34213456), or Book A Meeting.
(This article was first posted in June 2024. It may occasionally be refreshed/ updated.)
