In today’s economy and business environment, a changing of the guard is taking place. There are new ways of making money and new ways people are spending it. Investors are faced with two options in this changing marketplace: Adapt and profit or resist and fade.
There are fortunes being made in ways that seem unimaginable to even the most millennial of millennials. One of the perfect examples of this is a 7-year-old named Ryan, of the Ryan ToysReview YouTube channel. In 2018 he has estimated earnings of $22 million. His “job” is creating videos of playing with toys and posting them to YouTube. As the views roll in, Google sends him a piece of the advertising revenue his videos create based on their algorithms.
While not everyone will be a YouTube star or get paid for sponsored Instagram posts, it goes to show that the American creativity and entrepreneurial spirit is alive and well. We can all debate whether this is productive for the economy, but I believe it shows a deeper trend that investors need to recognize.
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Ryan is the New Age version of the Mickey Mouse Club kids. Media is changing, and as things go more digital the shifts in trends will trickle down to 401(k)s and investment accounts. The old way of creating and distributing entertainment is fading, and new forms are gaining in popularity.
Industries upended by speedy innovation
The same is true of other industries that are in the middle of major disruptions. Uber is changing the way we get around. Taxi cab medallions in New York City that once traded for over $1 million are now changing hands for under $200,000. Hotels are competing with private homes via Airbnb. Automobiles are going driverless and gas-less.
Changing trends and consumer tastes are nothing new. Technological advancement is also nothing new. Here is what is new about today’s economy and what investors need to be ready to react to: The timetable.
The speed with which entire industries are being upended is alarmingly fast when compared to the economic landscape of even just a decade ago. It took 75 years for the telephone to reach 50 million users. The radio then came along, and it only took 38 years to reach the same 50 million users. TV was next, and it took 13 years.
When we entered the age of the internet, it took four years. One of the most interesting adoption rates in recent history is the speed in which Pokémon Go reached 50 million users: just 19 days.
What this means for investors
Am I saying you should quit your day job and post pictures on Instagram professionally? Or that you should invest all of your money in Google or the parent company of Pokémon Go? Of course not.
What I am suggesting is if you are a stock investor, it is ever more important to keep your finger on the button and be prepared to quickly navigate the extreme pace that business is moving. It will only get faster.
If you do not have the time, expertise or inclination to create and implement a well thought out portfolio, then find someone who does. Indexes can work as well, but indexes are also forced to own the soon-to-be-outdated companies. They must hold the losers in this economy as well as the future winners.
Based on this, here are some key takeaways for investors:
- If you are holding on to a stock of a company that looks like it might be antiquated, consider changing up your investment strategy.
- Take only as much risk as you can afford and stomach.
- Keep in mind that things continue to change and will do so at an increasingly faster rate. Bring in some extra help if you need it to attempt to make sense of your investments and how they fit into your goals.
The millennial economy is always changing, so pay attention to industry innovation when making your latest investment decisions.
Securities offered through LPL Financial, Member FINRA/SIPC. Investment advice offered through SFG Wealth Management, a registered investment advisor. SFG Wealth Management and Synergy Financial Group are separate entities from LPL Financial.
The opinions voiced in this material are for general information only and are not intended to provide specific advice or recommendations for any individual.
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