Investment trends are nothing new. New technologies can create exciting investment opportunities. The challenge is knowing which trends have staying power and fit your long term investment plan.
Past Trends:
Before we examine the ifs and hows, let’s look at trends that have come and gone:
How to Differentiate a Trend from a Fad
Investment trends are not fads. A genuine trend is backed by measurable advancements in innovation, earnings, productivity, or sustained demand. These opportunities are researched by analysts, portfolio managers, and industry experts. A fad is driven by excitement and speculation; with little evidence it will last. Understanding the difference is important.
Methods of Investing in Trends
There are two ways to invest in a trend. One is to invest directly in the companies or industries involved. The other is to invest in businesses that support the trend. For example, an investor interested in AI could invest directly in AI companies or in supporting infrastructure. Both approaches may provide exposure to the same trend but involve different levels of risk.
Trends & Your Portfolio
Investment trends don’t last forever. Historically, even the strongest trends eventually slow, experience periods of decline, or are replaced by new opportunities. Because emerging trends experience greater price swings while investors determine their long-term value, maintaining a diversified portfolio remains the best way to manage risk.
Before investing in any trend, it’s also important to look at what you have. Portfolio managers regularly evaluate potential opportunities. Supported by analysts, they evaluate companies and determine whether they have potential to fit a portfolio’s objectives and risk profile, sometimes well before an idea hits newsstands and blogs. As a result, you may already have exposure to emerging trends.
Before making changes to your investments, it's also worth confirming that a trend aligns with your risk tolerance, complements your existing investments, and supports your long-term financial goals.
To learn more about today’s trends and how they fit within your plan, contact KLT Wealth Management.
