What Trends Could Define the Future of Investing?

In 2002, Apple was five years away from introducing the iPhone, Google was the third-most-popular search engine—behind MSN and Yahoo!—and Amazon.com was little more than an online bookstore. Who could have guessed that, just two decades later, all three stocks would dominate the S&P 500^® Index?

While no one can reliably predict what technologies and trends will dominate the investing landscape next year, much less two decades from now, paying attention to current conditions could provide some clues.

Take our quiz to learn more about those worth watching.

Note: All companies and funds mentioned are for illustrative purposes only and should not be considered recommendations.

1. If cybercrime were a country, by 2025 it would be the world's:

a) Largest economy

b) Third-largest economy

c) Ninth-largest economy

d) 12th-largest economy

2. By 2050, climate change is expected to reduce global economic output by:

a) $9 trillion

b) $16 trillion

c) $23 trillion

d) $30 trillion

3. Roughly 70% of the world's rare-earth metals are currently controlled by:

a) Chile

b) China

c) India

d) Turkey

4. In 2021, the global artificial intelligence (AI) industry generated $51.5 billion in revenue. By 2023, that number is expected to exceed:

a) $110 billion

b) $250 billion

c) $375 billion

d) $500 billion

5. Which industry is expected to reach a trillion dollars in revenue by 2040?

a) Augmented reality

b) Autonomous vehicles

c) Space sector

d) Sustainable agriculture

6. What percentage of U.S. households lack home internet access?

a) 15%

b) 23%

c) 31%

d) 37%

7. In 2022, sales of virtual real estate are projected to reach:

a) $50 million

b) $150 million

c) $750 million

d) $1 billion
 

1. Answer: B | Global cybercrime-related losses are projected to reach $10.5 trillion¹ by 2025—more than the forecast gross domestic product (GDP) of Japan,² the world's third-largest economy—up from $3 trillion just a decade earlier. As the threat grows, so will the need for cybersecurity technologies, creating an industry ripe for innovation. Though it's difficult for companies and investors alike to successfully navigate such a fast-moving field, outfits like CrowdStrike and Palo Alto Networks are already using artificial intelligence (see question No. 4) to anticipate threats. Investors interested in this space might also consider a cybersecurity-focused exchange-traded fund (ETF) to gain access to a range of companies, both domestic and foreign.

2. Answer: C | Climate change could undercut global economic output by as much as 14%, or $23 trillion, over the next 30 years.³ That said, technological advances in clean energy could help reduce the world's reliance on fossil fuels and potentially benefit investors. For example, companies such as AES and BlocPower are developing systems to make clean energy less expensive and more accessible, even if the International Energy Agency recently observed that "the world's hugely encouraging clean energy momentum is running up against the stubborn incumbency of fossil fuels." Investors can look for ETFs focused on alternative-energy solutions.

3. Answer: B | One of the biggest challenges for the green-energy industry is access to cobalt, lithium, and about a dozen other rare-earth metals necessary to produce components in electric vehicles (EVs), solar panels, and wind turbines. China dominates the supply chain, which has prompted the U.S. government to launch a $140 million project to develop the first domestic rare-earth-metals refinery. The European Union has launched a similar initiative, to the tune of €1.7 billion. Increasing demand alongside government investment could be a boon to many related industries, though it's important to note that, like fracking, rare-earth-metals extraction faces fierce environmental opposition in many parts of the world. While there are only a few rare-earth-metals-focused ETFs available in the market, more may pop up as demand for these critical metals continues to grow.

4. Answer: D | It's difficult to find an industry that isn't likely to be disrupted by AI, which helps explain why global AI revenue is expected to grow tenfold⁴ to more than half a trillion dollars by 2023. How we live and do business will possibly be transformed in the years ahead—whether by self-driving vehicles or smart applications that learn from and respond to user behavior. AI-focused ETFs have been around for years; however, even professional fund managers may have trouble keeping up with this rapidly evolving field.

5. Answer: C | The global space industry is expected to reach $1.5 trillion by 2040—roughly equivalent to 5% of U.S. GDP.⁵ Commercial launches related to satellites and space cargo are already bringing in big bucks, with NASA partnering with private companies like SpaceX to complete its missions. Space tourism, on the other hand, isn't yet profitable, while other initiatives, such as mining asteroids, remain theoretical. Although it could take years for the industry to realize its potential—and government regulation could constrain growth—investors looking to get in on the ground floor can research space exploration–focused ETFs.

6. Answer: B | Life in the 21st century all but requires reliable internet access, yet many parts of the country still lack broadband. Indeed, during the height of the COVID-19 pandemic, the shift to distance learning and remote work left nearly a quarter of U.S. households behind.⁶ To help bridge this digital divide, the Infrastructure Investment and Jobs Act of 2021 earmarked $65 billion for broadband improvements. Potential beneficiaries include internet service providers such as AT&T and Comcast—assuming the program isn't reconsidered by the 118th Congress, which takes office on January 3, 2023. ETFs focused on the Communication Services sector can help investors participate in the potential benefits of expanded broadband.

7. Answer: D | Last year, companies and individuals snapped up some $500 million in real estate on metaverse platforms Decentraland and The Sandbox, which together account for 95% of all virtual real estate sales. That $500 million figure is expected to double in 2022 and grow by 31% annually⁷ through 2028, contributing to a total metaverse economy of between $8 trillion and $13 trillion⁸ by 2030. For now, the metaverse is mostly used to create, buy, and sell virtual assets like art, fashion, music, and gaming paraphernalia—but in the future there could be real-world applications that transform commerce, education, and even work. This nascent industry faces significant cybersecurity challenges—and transactions are currently confined to highly volatile cryptocurrencies, which themselves are speculative assets with the potential for financial loss, fraud, and lack of recoverability. Be that as it may, you can find more than half a dozen metaverse-focused ETFs.
 

Learn more about investing in emerging trends with thematic investing.

Thematic investing—which uses research to identify trends and then group relevant companies across sectors into overarching themes—lets you align your investments with your interests and values. There are many ways to invest in a given theme, including stock lists and ETFs:

• To learn more about and view Schwab's 40+ thematic stock lists—including Blockchain, Cyber Security, Space Economy, and more—log in to schwab.com/thematic-investing.
• To research thematic ETFs for your portfolio, log in to schwab.com/ETFscreener, select Fund Name under the Basic Criteria dropdown, then enter a relevant search term, such as artificial intelligence, clean energy, communication, cybersecurity, metaverse, rare earth, or space.

As any early-stage investor will tell you, potential is not always realized.  Despite the early promise of nuclear power, for example, opposition from environmentalists and the attendant regulatory costs have so far curtailed its widespread adoption.

"There's a lot of uncertainty with new industries," says Mark Riepe, head of the Schwab Center for Financial Research. "Some thrive, but many crash and burn, so you have to be careful not to overexpose your portfolio, no matter how tempting the opportunity may seem."