The day-to-day ups and down of the stock market can be stressful, but it’s important for investors to remember that — especially when we’re talking about retirement savings — your time horizons isn’t months, it’s decades.
This can be especially different in a volatile year like this one, where the S&P 500 continues to whip back and forth. Despite the discomfort that can come from such rough waters, it’s important to see the other side — the opportunity. If you’re thinking about picks to hold until retirement, such downturns can mean the perfect time to snag a bargain.
With that in mind, one formula for success is to identify a mega-trend, or specific industry with momentum and growth, and then identify strong companies within it. Or — even better — find a fund that tailors to the trend, so you get a basket of companies all playing towards that upward tide.
Let’s take a look at seven mega-trends that should definitely be on your radar, along with a few funds and companies to invest in each.
Over the past few years, it feels like there has been a big-time data breach every month or so, beginning back with a disaster at Target (TGT).
That’s not great news … but it’s promising for those companies helping provide protection. The growing demand for cybersecurity has several touch points, such as exploding demand for cybersecurity talent. But the technology is also important.
Yes, cybersecurity is an increasingly crowded space, but the sheer demand suggests a rising tide will lift all boats in this relatively new industry.
One way to play that reality is with the PureFunds ISE Cyber Security ETF (HACK), which launched late last year. It has been battered alongside the broader market lately. But with a basket of leading names in the cybersecurity space, from Rapid7 (RPD) to Proofpoint (PFPT) to Imperva (IMPV), that dip could be the perfect time to jump in for a long-term hold.
Investment Mega-Trends: Mobile
Last month gave us one of the most anticipated events in tech — the reveal of the latest iteration of the world-changing Apple (AAPL) iPhone. And just a few weeks later, the new gadgets actually hit the market and set a new record for weekend sales.
While that could be a bull case for Apple, it also represents one of the biggest mega-trends of our time: the move to mobile devices.
It’s difficult to attend any kind of event without noticing the crowds of consumers capturing it on their mobile devices — something that didn’t happen just a few years ago. There are, of course, lots of angles to the mobile mega-trend … from betting on actual hardware-makers, to betting on suppliers like semiconductor companies Taiwan Semiconductors (TSM) and TriQuint Semiconductor (TQNT).
Perhaps one of the most forward-looking, though, is a bet on a company like Synaptics (SYNA) which combines security and mobile. It develops interfaces for touchscreens and fingerprint authenticators … and is up 18% so far this year despite the broader market’s struggles.
Investment Mega-Trends: Water Demand
In case you’ve been living under a rock, California is its fourth year of a terrible drought, with Governor Jerry Brown declaring a state of emergency at the beginning of this year.
Unfortunately, the lack of water in California is less of an anomaly than the headlines would lead one to believe; water scarcity is another notable mega-trend.
The World Bank estimates that water availability per capita will fall be cut in half by 2050 — a reality that doesn’t just affect access to drinking water but also the loads of water relied on for agriculture. This worrisome mega-trend points directly to several companies whose products and services could be in high-demand thanks to looming, worsening water scarcity.
American Water Works (AWK) and Mueller Water Products (MWA) are two examples, while investors can also go the fund route with First Trust ISE Water Index (FIW), which holds both those stocks among a laundry list of others.
Investment Mega-Trends: Entrepreneurship
There are several different ways to describe this next mega-trend: a rise in the individual, a rise in entrepreneurs, a notable shift in working preferences and workplace culture. More and more, entrepreneurs are driving economic growth, technological innovation and more.
This trend casts a wide net that investors can bet on several ways — aiming for trends that arise as a result of entrepreneurship or even considering the trends driving it. The mobile mega-trend we already mentioned, for instance, undoubtedly plays a role in this shift. The general migration to cloud technologies — which has lowered cost to entry to many tech companies — has done the same.
And on the flipside, tech entrepreneurship could end up merely being a boon to the tech companies that snatch up the latest startup benefiting from this new age of innovation.
Investment Mega-Trends: Demographics
It’s no secret that the world’s population is exploding or that, zooming in on the states, the population here at home is aging quite rapidly.
This reality is tied closely to general growth in healthcare spending (among other mega-trends) — and for better or for worse, it’s hard to talk about healthcare spending without talking about pharmaceuticals. The global market is “worth $300 billion per year” and continues to grow.
The options within that industry alone are seemingly endless. But focusing on boomers in specifically, a name like Amgen (AMGN) comes to mind. Amgen makes an arthritis drug and nearly half of adults aged 65 or older suffer from the disease.
Investment Mega-Trends: Climate Change
Pivoting back to the environment, it’s impossible to ignore climate change. This trend hardly exists in a bubble, but is instead directly tied to the aforementioned resource scarcity and changing demographics, as Ernst & Young pointed out in this recent report — and this trend also comes with several different angles.
Energy consumption and emissions make one huge piece of the piece of the puzzle, pointing to solar stocks as potential long-term stocks to consider. In fact, JinkoSolar (JASO), First Solar (FSLR) and Trina Solar (TSL) are three names in Motif Investing’s climate change basket.
Investment Mega-Trends: Content Consumption
To end on a lighter note, another mega-trend to consider relates to content consumption — especially in the states. I don’t just mean the cord-cutting trend either — that’s merely a symptom of the far larger trend of entertainment and pop culture taking a larger and larger role in American society.
The content explosion, which has led to a more fragmented consumption experience, is a symptom of this reality.
The catch-22 of this trend is that fragmentation and cord-cutting make the most traditional entertainment plays a bit questionable, as evidenced by sales struggles for giants like Time Warner (TWX). But a pick like Disney (DIS) is diversified far beyond its TV business and squeezes multiple revenue streams out of every character it creates.
Similarly, Netflix (NFLX) was one of the original disruptors of the old-school content distribution model and thus boasts an impressive moat with regards to streaming entertainment. That’s the kind of big-picture play that will pay off for investors who have patience and can recognize that a long-term time horizon requires some long-term thinking.
Alyssa Oursler is based in San Francisco and writes about technology, investing, gender and entrepreneurship. Her work has appeared on Forbes, Business Insider, MSN Money and more. You can follow her on Twitter here or check out her personal site here. As of this writing, she was long AAPL.