Future of investing: what do those three words make you think? They suggest that some new techniques are on the horizon, so are you ready? Opportunity is knocking and looks like NFTs, DAOs, and crowdfunding. Here is what you need to know to make the most of it.
The future of investing is shaping up right before our eyes. From expanding markets to technological advancements, investing has changed dramatically. There are several new practices and resources to discover. Set yourself up for success.
How has investing changed, and how do you invest successfully in the 21st century? Are there any new tools available? Which opportunities should you avoid or chase? Here’s what you need to know.
Table of Contents
Understanding the future of investment requires an understanding of history. Many factors contributed to the evolving field, with technology being one of the most influential. Let’s look more closely at how historical changes have impacted today’s investment opportunities.
People looking to invest had limited options at the turn of the century. The primary option was to deposit extra money into a savings account at the bank. That money then grew based on a fixed interest rate.
However, banks weren’t as secure, causing many who deposited money to incur significant losses. Deposits weren’t necessarily safe until the Federal Deposit Insurance Corporation (FDIC) was created in 1933. In the meantime, the most common investment became real estate.
The primary risk here is that the real estate market is volatile. It’s also subject to economic cycles, meaning investment opportunities and returns aren’t always consistent. After the Great Depression of the 1930s, people wanted to steer clear of risky investments and volatile stocks.
Fast-forward to the 1950s. Only about 6.5 million Americans owned stock, which was just about 4.2% of the population. Compared to today, the investing process in the ’50s was far more expensive and time-consuming.
The Glass-Steagall Act came about in 1933. It separated investment and commercial banking activities, making stock brokerages private entities. From there, fixed commissions became the norm. They were also high-priced and non-negotiable. It was time-consuming to invest, with no technology available to help streamline the process.
We’er now in the 1970s when mutual funds grew in popularity. Individual retirement accounts (IRAs) were formed, and index funds were also introduced. Technological investments also allowed investors to store their stocks electronically in a central depository rather than hold onto physical stock certificates.
In 1975, the Securities and Exchange Commission (SEC) banned fixed minimum commission rates. This, coupled with processing improvements and technological advancements, significantly increased the trading volume and popularity of stock investing.
Thankfully, the investing process is significantly more accessible than in earlier decades. Thanks to the internet, the future of investing looks bright for previously underrepresented groups. Wise investment opportunities are widely available at any time and to anyone.
Technological advancements and the availability of online brokers also make it much easier to make investments. However, investing nowadays isn’t just about navigating the traditional stock market or real estate listings. The future of investing is complex and expansive, with resources and avenues previously unheard of.
There is much to look out for in the future of investing. Countless tools exist for newcomers to build portfolios. Key elements include:
- ESG investing
The future of investing also looks like fewer financial advisors and more self-ruled investors. Here’s why:
Environmental, social, and governance or ESG investing pertain to socially responsible investment practices. It is used to grade an investment’s sustainability based on several criteria. ESG factors include carbon emissions, fair labor practices, and board member diversity.
ESG investing considers all those factors when determining whether to invest. The criteria judge both the investment’s financial return and its overall impact. ESG investing creates a more sustainable investment portfolio and has been linked to higher returns and lower risk overall.
A primary goal of ESG investing is to allow investors to honor their morals and values without sacrificing their financial returns. ESG investing is critical to the future of investing, especially for conscientious start-ups.
One of the mass appeals of cryptocurrencies is decentralized, meaning a single institution or the government doesn’t control them. Decentralized autonomous organizations, or DAOs, are groups of people with no central leadership. They come together around a specific set of rules enforced on the blockchain.
DAOs are internet-native groups managed by their members without any hierarchical power system. Therefore, members own the organization as a collective, and people become members by obtaining a crypto token specific to the DAO. Their tokens also provide voting rights within the organization.
Because DAOs are built on the open-source blockchain, they’re fully autonomous and transparent. This means anyone can view the code and see what’s happening. Then, smart contracts help DAOs operate and enforce their rules.
One of the reasons why DAOs are so critical to the future of investing is that they’re internet-native organizations. We just so happen to be living in an internet-dominated world. There’s a required level of trust for the people in charge of the operations in traditional organizations, but that’s not the case with DAOs.
Instead, those involved only need to put their faith in the code backing the DAO, which in most cases is more reliable than real people. This coding is also public and extensively tested before it launches. Decentralization is a keyword in the future of investing.
DID YOU KNOW: DAOs allow people to come together and pool funds for a specific investment, including early age start-ups and innovative projects.
Cryptocurrencies have been on investors’ minds for years now. Meanwhile, the recent non-fungible token (NFT) craze has sparked more interest. NFTs are a type of crypto asset that exists on the blockchain. They’re often digitized versions of physical items, like pieces of art or real estate. Investors purchase them through “tokenizing.”
Unlike cryptocurrencies, NFTs are non-fungible. That means they can’t be traded or exchanged at equivalency, like Bitcoin, or used for commercial transactions. However, you can purchase NFTs with cryptocurrency and use their value in other ways.
Non-fungible tokens offer a unique sense of market efficiency. They streamline purchases by digitizing physical assets and removing any intermediaries. There have already been countless successful NFTs sold for astronomical amounts of money. More spring into existence every day.
Here are some shocking examples of successful NFT sales:
- Doge sold for 1,696.9 Ethereum (ETH), or around $4 million, in June 2021.
- Bored Ape #8817 sold for 819 ETH, about $3.14 million, in October 2021.
- CryptoPunk #3100 sold for 4,200 ETH, or approximately $7.58 million, in March 2021.
Ultimately one of the most appealing aspects of NFTs is their ability to create new markets and forms of investments. For example, NFTs could be used in real estate parceling and trading. Their use could simplify another otherwise complex process.
Crowdfunding gathers small amounts of capital from a large group of people and then uses it to finance new business ventures. Crowdfunding is a very effective way to raise and pool money for start-ups, nonprofits, and other projects. It helps support the future of investing by providing new opportunities.
There are few money-raising or investment opportunities that make good use of the vast networks available on the internet like crowdfunding does. Millions of reachable people are on social media. Even crowdfunding-specific websites and groups are full of investors who may want to spend money on a cause.
Part of why crowdfunding will be elemental to the future of investing is that it allows the pool of investors to expand organically. With crowdfunding, you aren’t just limited to the traditional participants. Instead, virtually anyone can participate, even if they only have a small amount of money to spare.
GoFundMe, Kickstarter, and Indiegogo are some of the most popular crowdfunding platforms. Each has helped people raise billions for various projects, causes, and campaigns. Also, those investment options don’t require a massive payment to participate.
Our world is very digital. Some might even say it’s hyper-focused on technological advancements. We all want to improve our lives, especially regarding our finances. The future of investing could make that possible for oppressed groups and individuals with little financial literacy.
Traditionally, investors had to connect with a financial advisor to start investing and build a portfolio. These financial advisors would help people manage their activities and determine where to put their money. The problem with this is that financial advisor services are expensive. That expense caused entry barriers for those who couldn’t afford to hire an advisor.
That changed when robo-advisors emerged. Robo-advisors are digital, automated, algorithm-driven platforms that provide the same financial planning services as traditional advisors. However, there’s no required human supervision and little to no interaction. They also come at half the cost of conventional financial advisors.
You have to complete a survey that identifies your financial situation and goals. Then, the robo-advisor uses sophisticated software to handle everything else automatically. This means you don’t have to waste time making phone calls or physically meeting with someone to discuss your portfolio.
The future of investing will see a lot more self-ruled investors and robo-advisors. Many platforms have already introduced 24/7 investing services to encourage new groups to join the ranks. Instead of waiting for an office to open during regular business hours, investors can make quick decisions and buy or sell assets at any time.
Prepare for the future by learning more about NFTs, DAOs, crowdfunding, and cryptocurrencies. History shows how quickly things can change. Contemporary investors must stay ahead of the curve to avoid loss and encourage gains.
Understanding the future of investing means studying the various opportunities suddenly on your doorstep. The fact that you no longer need a large sum of money to get started is a blessing, although there’s a slight learning curve involved. Robo-advisors can help streamline different investment activities, but traditional advisors can help you strategize.
How do you choose the right option and embrace the future of investing? Follow these three simple steps:
Determine when, where, and how you’d like to invest your money. Calculate a budget to narrow the search for lucrative opportunities. Then check financial trends to ensure you’re on the right track.
Figure out whether you want to invest in the stock exchange or pour cash into NFTs and DAOs. Check for opportunities on crowdfunding networks to split your capital in several directions. Use robo-advisors to point you toward hidden projects.
Decide your goals, and then ensure your money is working for you instead of against you. Swap strategies if you have to, or put your cash into another pot is possible. However, always follow the rules of investing in NFTs or other blockchain assets.
The future of investing is upon us, and it’s all about accessibility. Therefore, it’s crucial to get involved early and take advantage of the many benefits. Most modern investors see tremendous growth and potential in the future of investing.
Learning about NFTs, DAOs, crowdfunding, and other opportunities makes investors more financially literate in an evolving economy. Find ways to pivot quickly and embrace the future of investing one addition to your portfolio at a time.
About the Author
Jonathan Hung is one of the most active angel investors in Southern California; his mission is to drive value creation within each portfolio company. In support of this mission, he serves as Co-Managing Partner at – Unicorn Venture Partners.
He and his team target investments in US companies with global market potential, focusing on long-term growth expansion to East Asian markets.
As a Managing Member for his family office fund, J Heart Ventures, Jonathan developed his investing prowess in start-up companies such as Gyft, ChowNow, Miso Robotics, Clover Health, and Bitmain, to name a few start-ups he funded.
Jonathan has various degrees from the University of Southern California, London School of Economics, Massachusetts Institute of Technology, and The Wharton School at the University of Pennsylvania.