How to invest in the future

June 2018

How to Invest in the Future

By Damon Frith

American author Edgar Allan Poe wrote a short story about a man flying to the moon in a balloon in 1835. It took 134 years for Poe’s fancy to become reality when astronaut Neil Armstrong stepped onto its surface.

In 1959 science fiction writer Arthur C. Clarke predicted the mobile phone complete with global positioning technology, it became reality 40 years later.

The time between a possible technology and it being put into use has progressively narrowed as the technological depth of the human race expands and increasingly faster computers are created.

In 2012 when Tesla and SpaceX founder Elon Musk first mentioned the Hyperloop tube transport system that would propel passengers underground at speeds faster than commercial jets it sounded like a futuristic concept. The first test run took place five years later.

Virgin hyperloop one

Tipping points are now close not just for finding cures to diseases like cancer, but also more creative concepts like augmenting physical and mental abilities and streamlining production processes with self-learning computers and robots that can mimic or better human movement.

Many of these innovations will be called intrusive technologies, and they will cause pain points like putting an end to some career paths.

But where one path ends a new path will form, and the workforce will adapt to be flexible and retrain as often as necessary.

The opportunities this change offers for the investor is staggering. By picking the themes that will dominate the technological changes of the future investors can get an exposure through multiple entry points.

“We're going to get devices which will enable us to send much more information to our friends. They're going to be able to see us, we're going to see them, we're going to exchange pictorial information, graphical information, data, books, and so forth.” Except from a speech by Arthur C. Clarke in 1976.

If we take driverless cars as an example you could be mistaken for thinking an investment in that sector would be about taking a position in the automobile industry, when in fact it’s about taking a position in the energy industry.

The infrastructure put in place over the decades to create the global energy system has come at a cost of US$55 trillion. Decarbonising the energy system will require it to be replicated or transformed, as well as being expanded to cater for new populations and the 1 billion people that are still without electricity.

Electric, driverless cars will be part of that transformation process. It’s not just about removing petrol cars from the roads, it’s also all the energy savings that can be made by automating the driving experience, where cars, traffic and surveillance systems and booking services all talk to each other in cyberspace with little input from the human side.

So it could be the pursuit of a portfolio of assets in electric cars could be spread across the logistics, energy, automation, automobile and artificial intelligence sectors and incorporate existing corporate giants in those areas, disruptors already making inroads and start-ups looking for early capital injections.

And it may involve buying shares, managed funds, corporate bonds, structured products, index funds or other paths like seed capital and private equity or hedge funds. And it will certainly require investment funds to follow the technology on whatever continent it is flourishing.

For the investor it means keeping risk top of mind, to ensure that wherever you invest, your future income needs remain protected.

Damon is the Content Editor for Citi’s Wealth Business

Important Information:

This document is distributed in Australia by Citigroup Pty Limited ABN 88 004 325 080, AFSL No. 238098, Australian credit licence 238098. Any advice is general advice only. It was prepared without taking into account your objectives, financial situation, or needs. Before acting on this advice you should consider if it's appropriate for your particular circumstances. You should also obtain and consider the relevant Product Disclosure Statement and terms and conditions before you make a decision about any financial product, and consider if it’s suitable for your objectives, financial situation, or needs. Investors are advised to obtain independent legal, financial, and taxation advice prior to investing. Past performance is not an indicator of future performance. Investment products are not available to US people and may not be available in all jurisdictions.