GOBankingRates recently held an exclusive Q&A with Jaspreet Singh, CEO of Briefs Media and the host of “Minority Mindset.” The topic of the discussion was, “How should younger generations structure their retirement savings strategy differently than older generations?”
More than anything, Singh’s responses highlighted how tech, AI and the internet have changed investing. In fact, these changes have been so fundamental that it’s fair to say that investors nowadays have to adapt to new marketplace realities if they want to succeed. Here are some of the important changes that Singh cited, along with a discussion on how to incorporate them into your overall investment strategy.
Speed of Turnover
Above all else, tech, AI and the internet have accelerated the speed of everything, from investing to consumer trends to the lifespans of companies. In fact, Singh cites the speed at which businesses turn over as the main difference between investing today and 30 years ago.
Companies nowadays can rise, grow and crash in what seems like the blink of an eye, rather than taking years or decades to go through their lifespan as in days past. Singh uses the examples of Sears and Bed Bath & Beyond as companies that were among the strongest in the economy 20 years ago, but that are now both bankrupt.
Need for More Constant Research
Along those lines, Singh notes that to succeed as an investor today, you need to be prepared to do more research — and to stick with it. In the past, “buy and hold” or “set it and forget it” were two investment mantras, suggesting that you could just buy quality stocks and hold them forever and you wouldn’t have to worry about monitoring your portfolio. One of the most popular investment strategies of years gone by was to buy the “Nifty Fifty” portfolio, which was a group of 50 large-cap stocks on the New York Stock Exchange that were favored by institutional buyers and conservative investors.
But Singh suggests that these days are over, thanks in part to the changes that tech, AI and the internet have brought to the investment world. The Nifty Fifty itself, for example, ended up with a number of duds, like Xerox, Kodak and Polaroid. Even the “bluest of the blue chips” in the group, such as General Electric, lost money for investors for decades.
According to Singh, if you plan on investing in individual stocks, you’ll have to invest smartly and continually study your investments, regardless of how dominant you think a company may be.
Availability of Diversification
If the idea of investing in individual stocks now seems daunting, Singh offers a way out. Rather than spending the necessary time and attention to research and monitor individual stocks, Singh suggests that you consider investing in mutual funds, exchange-traded funds or index funds.
All of these options offer you a much greater level of diversification than owning an individual stock. By owning tens or even hundreds of stocks in a single investment, you immediately lower the risk profile of your portfolio, and you won’t have to monitor it nearly as closely as you would with an individual stock. There’s a reason why, for example, the SPDR S&P 500 ETF Trust has nearly $394 million in assets under management — it’s an easy-to-use proxy investment for the overall stock market that can be bought or sold any time the market is open.
One thing that’s important to note for investors, however, is that just because a fund owns hundreds of different investments doesn’t necessarily mean it is highly diversified. Even the SPDR S&P 500 ETF Trust, for example, only holds large-cap stocks, meaning it doesn’t offer any exposure to small-cap, mid-cap or international stocks.
Access to Markets
The way that tech, AI and the internet have been the most directly transformational for the average investor is in terms of access to the markets. In the early days of the stock market, investors had to go into brokerage firms to open accounts, only received information that came from their broker, and typically had to have a relatively significant sum to even begin.
Nowadays, all of those barriers have fallen. Most firms allow investors to open accounts online in a matter of minutes, with no minimum balance requirements and even no commissions charged for most stock and ETF trades. This has opened investing to nearly everyone, allowing even the small investor to build wealth. Whether you want to invest in individual stocks, mutual funds, ETFs or index funds, this is a huge change in the investment world.
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