Four Future-Proof Investments for Your Portfolio
If the bond markets are an indication of where the economy is headed, then a full-blown recession could be just around the corner. Just last week, a closely-watched yield curve inverted for the first time in 12 years, one of the biggest warning signs that the economic recovery was on its last leg. Add record debt levels and a synchronized slowdown in global growth and you have the recipe for disaster.
Regardless of when it hits, a recession is likely at some point in the future. Unless you absolutely have to (i.e., employee-sponsored retirement account), playing the stock market as a whole probably isn’t the best option.
In the following article, we’re going to talk about four future-proof investments that can help see you through the next bear market. These asset classes have several inherent advantages that are likely to pay dividends now and in the future.
The four future-proof investments/investment ideas are:
Crypto winter has forced many blockchain enthusiasts to downplay the role of bitcoin in shaping the future market. Startups, venture capitalists and even new investors have been quick to point out that there is more to blockchain than just bitcoin. While this is certainly true, it doesn’t diminish bitcoin’s status as the best store-of-value asset in the virtual currency ecosystem.
Bitcoin has several distinct advantages that make it more likely to succeed long-term. Some of these advantages include complex design but easy application, a truly decentralized network (just as the U.S. Securities and Exchange Commission), relative advantage compared with other payment systems and observability. Bitcoin is also compatible with other innovations and is being adopted in various ways for mainstream investors. Just take a look at this article for a quick rundown of the massive bitcoin adoption drive currently underway.
The bursting of the ICO bubble has put greater emphasis on bitcoin as the best alternative store of value for crypto holders. Recently, cryptocurrency investment firm Grayscale declared the “return of the bitcoin maximalist” after 88% of capital inflows poured into its BTC fund. In the fourth quarter alone, the Bitcoin Investment Trust brought in an average of $2 million per week compared with just $300,000 for its other crypto investments.
The next bitcoin halving event is expected to take place in May 2020, giving investors plenty of time to continue cost-averaging before demand spikes.
Gold bullion has languished for the better part of eight years, as easy monetary policy and record low interest rates propped up global equity markets. Although gold has lost much of its shine, it’s the only asset that has withstood the test of time. Any forward-looking investor should consider the yellow metal as a viable safe haven for the future.
Precious metals have traded positively this year, with gold climbing to its highest level in ten months. The catalysts are many, from slowing economic growth to higher physical demand for jewelry. Investors may not be rushing to store gold bars in their vaults just yet, but the macro climate could strongly favor haven assets in the near future. Gold’s $7.5 trillion market cap makes it an attractive bet for investors who don’t understand bitcoin or unwilling to diversify into digital assets.
Global economic growth is expected to slow this year and next, with the International Monetary Fund, World Bank and Organization for Economic Cooperation and Development all lowering their forecasts. There are many weak spots from China to the U.K. and up to the Eurozone. Japan, the world’s third-largest economy, is also teetering on the brink of recession. If central banks are forced to add to their balance sheets again more than a decade after easing monetary policy in the first place, then the entire narrative behind the ‘great recovery’ will be called into question.
If pent up demand and a huge addressable market are the keys to success, then very few industries offer as much potential as cannabis. The push to make recreational marijuana legal across North America has paved the way for a generational investing opportunity.
Just last year, Canada became the first Group of 20 nation to fully legalize recreational cannabis, a move that analysts say will create a multi-billion-dollar industry for the world’s eleventh-largest economy. Canada is home to the world’s largest cannabis companies – key players in a global value chain that seeks to fulfil demand for recreational and medical consumption. Canopy Growth Corp (WEED), Aurora Cannabis (ACB) and Tilray Inc. (TLRY) have expanded rapidly in the last 12 months through a series of mergers and acquisitions that will support their ambitious growth plans.
Canadian growers are expanding their grow ops to enable greater economies of scale, which will allow them to achieve peak output while lowering per-gram production costs. A focus on alternative pot segments like oils and growing attention to medicinal marijuana markets will help these companies drain an expected supply glut at home. Read more: Thinking About Playing the Marijuana Boom? Don’t Do It Without Canopy Growth, Tilray and Aurora Cannabis.
Estimates of the size and growth rate of the marijuana industry vary, but some prognosticators are confident that the global market opportunity can soon reach $150 billion. In the United States, nine states have legalized recreational cannabis and dozens more permit marijuana consumption for medicinal purposes. Canadian producers are in prime position to meet the demand. For more information on North American pot producers, check out the Marijuana Index, which lists 46 companies in Canada and the United States.
The bitcoin revolution has paved the way for another market to take shape – one focused on tokenizing existing assets. Some have argued that the era of tokenization could unleash a $24 trillion market by 2027 spanning both financial and real assets. Listed and unlisted equities, bonds, home equities and real estate are just some of the segments that will be influenced by tokenization.
According to Finoa, “The Era of Tokenization has the potential to do to ownership rights, what digitalization did to media.”
In the short term, tokenization will impact standardized issuing products such as equity or bonds as the blockchain enables lower issuance and transaction costs. The same time period could see tokenization extend to smaller and more illiquid assets, such as business shares and real estate.
So, what’s the big deal behind tokenization? We’re not referring to any one particular company or asset but the concept of transforming real-world assets into digital tokens. This process extends far beyond what initial coin offerings and blockchain startups are doing but for investors, this domain might be the best place to start. Platforms and service providers that allow you to invest in real assets through a tokenized share and track the performance of your profit are the most likely to offer value.
This domain will have important synergies with the emerging world of security token offerings (STOs) and the platforms that enable them. It helps to keep track of STO projects being listed on platforms like Polymath, Securitize, Swarm and Securrency, among others. One area that could see the most disruption from tokenization is real estate. Instead of investing in an entire rental property, imagine owning shares of that property and earning profits that are commensurate with your holdings.
Disclaimer: The author owns bitcoin, Ethereum and other cryptocurrencies. He holds investment positions in the coins, but does not engage in short-term or day-trading.
Featured image courtesy of Shutterstock.