Even though many of the basic principles of investment have remained constant throughout the centuries, if not millennia, investors also have to look to the world around them to see what is going on right now and to deduce from that what the future might bring. With that in mind, here are three key predictions for 2020 and beyond into the foreseeable future.
There will be a move towards decentralisation
Centralized points of operation do offer many useful benefits, however, they also create single points of failure, the dangers of which have been recognized for many years, hence the old adage about not putting all your eggs in one basket. Decentralization spreads risk, however, for many years, this benefit had to be set against the inconvenience of trying to manage assets (human or technical) over extended distances and, of course, the greater the distance, the greater the level of inconvenience. The internet (and, in particular), the development of broadband, has already done a great deal to resolve the issues involved in the remote management of assets and hence to reduce the major barrier to decentralization, with the result that remote working is not just a reality, in some areas it is increasingly becoming the standard.
There will be increased emphasis on the human factors
While a company’s financial statements provide a lot of valuable information for (potential) investors, astute investors are well aware that they generally only tell part of the story. The other part is, what might be termed, the “human factors”, such as the quality of the management, the loyalty of the organization’s customer base and the broader social and political climate in which it operates. Over recent years, these human factors have come under increasing levels of scrutiny, again, probably in large part thanks to the internet, which has allowed people to broadcast information further, faster and more effectively than ever before. What’s more, consumers are now very aware of their ability to influence behaviour through the purchases they make (or don’t make). This situation means that companies who engage in what are perceived to be negative behaviours can quickly find themselves called to account for it, while companies which make the effort to understand the public in general and their consumer base in particular, can reap excellent rewards. One key point to understand here, however, is that it’s highly unlikely any company is going to please everyone all of the time, in fact it may actively annoy a particular segment of the population all of the time, while still being a good investment overall.
There will be a growing need to manage complexity
Forward-looking investment sectors have always existed and investors have long had the potential to be confused by them, misled by those with unrealistic plans based on little-understood areas of technology, or, quite simply, scammed by bad actors preying on a fatal combination of ambition (or outright greed) and ignorance. In our modern world, however, the pace of change together with the development of the internet has created a situation where investors seeking decent yields are now having to navigate their way through complex situations as a matter of routine. Even with all the internet (and other) resources at our disposal, high levels of complexity may be beyond the level at which individual investors feel comfortable operating on their own and so it seems very probable that there will be an increasing need for them to find help making their way through the maze of modern investment options, especially, but not exclusively, high-tech ones. This help may take the form of software tools, it may also take the form of humans, but in either case, investors will need to feel a suitable level of trust in them.