
Most read
‘Optimistic borrowers’ could endanger housing market, RBA says...
‘Optimistic borrowers’ could endanger housing market, RBA says...

Latest Podcast
Home values up 30% (or are they); NFTs taking the world by storm, and why Keatin...
Home values up 30% (or are they); NFTs taking the world by storm, and why Keatin...

Resources
There is $17.5 billion in lost and unclaimed super across ...
There is $17.5 billion in lost and unclaimed super across ...
Invest
The risks and opportunities in 21st century investing
What a start to the third decade of the 21st century. As 2019 closed, the eastern states of Australia experienced some of the worst and most devastating bushfires on record. Then, just when life was returning to normal, the world was engulfed by the global pandemic COVID-19. With hindsight, none of us could ever have envisaged our lives would change so much in such a short space of time.

The risks and opportunities in 21st century investing
What a start to the third decade of the 21st century. As 2019 closed, the eastern states of Australia experienced some of the worst and most devastating bushfires on record. Then, just when life was returning to normal, the world was engulfed by the global pandemic COVID-19. With hindsight, none of us could ever have envisaged our lives would change so much in such a short space of time.

The same could be said of what is and continues to happen in sharemarkets. We are all living in a great period of change that is coming at us from every direction. From an investment perspective, that poses both tremendous opportunities and risks.
The change in the way businesses operate has been in train since the 1960’s with the evolution of computers and basic robotics. The rate of change accelerated with the large-scale rollout of the internet and the subsequent technological advancements in the last 10 years. In 1999, I recall a senior businessman who proclaimed the internet would amount to nothing. Yet as the pandemic has proven, the rate of change in the online and e-commerce space is not only growing but accelerating to the detriment of old business models.
According to PGIM asset management “In 1990 the Big Three Detroit automakers had revenues of US$250 billion, and 1.2million employees. Today, the three top tech companies have more than twice the revenues and fewer than one-third the number of workers.” PGIM refers to these companies as weightless, and intangible asset companies now represent 85 per cent of the US S&P 500.
The Australian sharemarket has a far higher concentration of financials and resource shares, but as the technological, healthcare, online digital marketplace expands, the make-up of the ASX 200 will also evolve. For investors it is no longer prudent to just expect what worked in the past will be reliable in the future. Arguably, the pandemic has accelerated many of the tech trends and time will only tell what the long-term structural changes to the economy are, in terms of the workplace, transportation and international travel.
As shareholders we want to own those stocks that are in tune with the challenges (21st century risks) and can not only manage them but turn the potential negative impacts into a positive.
The major risks and opportunities can be classified broadly into five categories:
- Disruption can be technological, the old world versus the new world business models as well as regulatory risks as we saw with the fallout from the Royal Banking Commission or the Banks back stopping Australians in the lockdown phase of the pandemic.
- Climate change risks are increasingly being acknowledged as real and potentially significant across all aspects of businesses, notably in the energy, transport, building, insurance and banking sectors.
- Populism is on the rise and poses regulatory risks to investors, think antitrust legislation against the US tech behemoths.
- Ethics and governance is on the rise. Funds flowing into ESG (Environmental, Social, Governance) continued during the March 2020 corona crash, showing not only resilience but an ongoing growth trend.
- Interest rates – lower for longer. The full force of Central Banks’ monetary policy to boost economies and liquidity will mean lower to negative interest will continue to underpin growth stocks (weightless companies) and investors will seek out growth for sharemarket returns,
All five points pose both risks and opportunities to investors. Zoom, Netflix, Nvidia and Shopify in the US, to name but a few, have all been big winners from the pandemic Traditional business models are being challenged by ecommerce, streaming, gaming and at home, work. Cloud computing and ancillary services are on a tear and the millennials are supporting shares in the USA like Tesla and Beyond Meat with the transition to the electrification of the transport sector and meat less products (another winner from the closure of abattoirs during the pandemic). Telehealth and online medical services have also grown, out of necessity. This trend is only expected to accelerate.
Whilst the opportunities may seem greater in the larger US sharemarket (NASDAQ), Australia has a growing suite of listed companies that offer investors exposure to these sectors as well as long term secular growth markets in healthcare. The list includes data centres and cloud software providers like Next DC (NXT), Technology One (TNE), Xero (XRO) to data analytics Appen (APX), and the burgeoning payment platforms of AfterPay (APT), ZIP Money (ZIP) and EML Payments (EML) and our healthcare leaders CSL, (CSL), Resmed (RMD) and Cochlear (COH).
In these times of great change, all investors need to keep an open mind and remain alert to investing with the risks and opportunities in mind. Equally a healthy dose of restraint is sometimes needed as new opportunities in growth markets quickly become speculative bubbles.
Danielle Ecuyer is an author and investor.

Investment insights
Business warned on COVID vaccine policy backlash
Businesses that pressure staff into getting a COVID-19 vaccine are being warned they could face discrimination, harassment, bullying and employment abuse claims, according to an industry expert. ...Read more

Investment insights
5-step guide to teaching kids about money
It’s never too early to start teaching kids about money and how to manage it. With the added challenges associated with COVID, it’s never been more important either! ...Read more

Investment insights
Why ethical investing is at a tipping point
Best-selling author Malcolm Gladwell said it best: “Look at the world around you. It may seem like an immovable, implacable place. It is not. With the slightest push – in just the right place – ...Read more

Investment insights
Ares withdraws from AMP bid as wealth manager’s financial results spell trouble
The bad news keeps rolling in for AMP, with the wealth manager reporting a significant drop in profit as its US bidder, Ares Management Corp, announces that it is backing out. ...Read more

Investment insights
‘RBA not responsible for asset prices’, governor says
RBA governor Philip Lowe has said that the Reserve Bank is not responsible for targeting asset prices, after questions were raised about the creation of raging bull markets against the backdrop of l...Read more

Investment insights
Retailers report strong HY21, with Super Retail set to refund JobKeeper
Certain Australian retailers are flourishing despite the government-mandated temporary store closures in 2020, with JB Hi-Fi reporting good sales growth and Super Retail Group pledging to hand back $1...Read more

Investment insights
Yes, working from home is risky. Here’s how to counter that
Before COVID, 26 million Americans worked from home part-time or full-time, and now that number has tripled. ...Read more

Investment insights
ESG is becoming popular but ‘greenwashing’ is a problem
Sustainable investing is back on the radar as a result of the COVID-19 pandemic, but experts warn that better standards around ESG products are needed to mitigate “greenwashing”. ...Read more

Home values up 30% (or are they); NFTs taking the world by storm, and why Keating thinks Aussies will be ‘poor’ in retirement
Listen now

Raging floods, the tech stock bubble and the ongoing SG debate
Listen now

Meet the Manager with Trilogy’s Philip Ryan: RBA rates and property price growth
Listen now

The continued property boom, ethical investing and engaging with your super fund
Listen now

Investment insights
Business warned on COVID vaccine policy backlash
Businesses that pressure staff into getting a COVID-19 vaccine are being warned they could face discrimination, harassment, bullying and employment abuse claims, according to an industry expert. ...Read more

Investment insights
5-step guide to teaching kids about money
It’s never too early to start teaching kids about money and how to manage it. With the added challenges associated with COVID, it’s never been more important either! ...Read more

Investment insights
Why ethical investing is at a tipping point
Best-selling author Malcolm Gladwell said it best: “Look at the world around you. It may seem like an immovable, implacable place. It is not. With the slightest push – in just the right place – ...Read more

Investment insights
Ares withdraws from AMP bid as wealth manager’s financial results spell trouble
The bad news keeps rolling in for AMP, with the wealth manager reporting a significant drop in profit as its US bidder, Ares Management Corp, announces that it is backing out. ...Read more

Investment insights
‘RBA not responsible for asset prices’, governor says
RBA governor Philip Lowe has said that the Reserve Bank is not responsible for targeting asset prices, after questions were raised about the creation of raging bull markets against the backdrop of l...Read more

Investment insights
Retailers report strong HY21, with Super Retail set to refund JobKeeper
Certain Australian retailers are flourishing despite the government-mandated temporary store closures in 2020, with JB Hi-Fi reporting good sales growth and Super Retail Group pledging to hand back $1...Read more

Investment insights
Yes, working from home is risky. Here’s how to counter that
Before COVID, 26 million Americans worked from home part-time or full-time, and now that number has tripled. ...Read more

Investment insights
ESG is becoming popular but ‘greenwashing’ is a problem
Sustainable investing is back on the radar as a result of the COVID-19 pandemic, but experts warn that better standards around ESG products are needed to mitigate “greenwashing”. ...Read more