Investment is a word that becomes more and more important to us as we grow up. Investment refers to putting some resource, usually money, into something to generate income or profit over time. This is a very important idea to save and increase your money. An investment could be the best answer to inflation, a real threat to financial independence. Simply put, investment means money that brings you money.
With the world rapidly changing, the investment landscape is also changing. These changes are shaping the future of investment. Among these changes are; the increased integration of technologies and AI risk management, the rise of sustainable and responsible investing, and, of course, the globalization of investment. Investors need to stay up to date with these changes in order to keep up with the ever-changing investment landscape.
Alliance with AI
The hottest trend in the world now is Artificial Intelligence, also known as AI. AI is helping people in many different sectors, including investment. So, how can AI help an investor in choosing the right investments? People often tend to carry out market surveys and assess the risk factors before investing. AI can help people with that. As AI works with data and statistics, AI-driven algorithms combine the power of data analysis, pattern recognition, and automation to help make informed trading decisions. People can be superstitious, which can interfere with informed and impartial investments. However, with the help of AI, these can be eliminated and determined solely based on merit. People can also personalize how and where to invest with human insight and machine analysis.
ESG: Investing in green returns
Another vastly discussed trend in the world now is sustainability. People have started to consider the ESG factors of investments. ESG factors are Environmental, Social, and Governance (ESG) factors that determine a company or investment’s sustainability. People use these factors to evaluate an investment opportunity’s financial and overall global impact. Environmental factors account for the conservation of the world, social factors evaluate how a company treats its employees and consumers, and lastly, governance factors scrutinize how the company is run. Environmental factors look at things like carbon emission, waste management, green energy initiatives, polluting the environment, etc. On the other hand, Social factors cover diversity and inclusivity, workplace safety, data security, human rights, customer satisfaction, etc. Lastly, governance factors cover things like transparency, bribery and corruption, political contributions and lobbying, business ethics, etc. So, according to these factors, a company should be socially responsible and sustainable rather than maximize profit. We need a healthy world to produce, evolve, and continue the growth of our global economy. For this reason, investors are backing companies taking climate change seriously while also taking the necessary steps to eliminate their involvement in climate change. And this trend is likely to continue in the distant future too.
Globalization of Investment
With the introduction of the internet, the world is getting smaller for people. Globalization is happening everywhere, even in investments. In the investment world, globalization means increasing the flow of capital across borders. This could be in the form of direct foreign investment or portfolio investment. Connecting with someone from the other side of the world is now easier than ever. Expanding one’s horizon can lead to newer opportunities and new ways to profit from them. With so many investors, the businesses also compete for their attention, which benefits the market and consumers. For example, Japan has invested a lot in our country. Some of these investments are foreign direct investments (FDI), and some came from Japanese companies, i.e., Japanese investors. In June 2023, it was estimated that around 350 Japanese companies had invested more than 380 million USD in Bangladesh. There is also a Japan Export Processing Zone in Narayanganj, which was established to increase even more Japanese investments. These investments helped Bangladesh a lot. It created jobs, boosted exports, and attracted more foreign investments. Hence, we can say that globalization of investment can also change a country’s economy. With the world becoming more and more open for us, it could open a new horizon for all.
Future trends: Better to diversify?
In investments, few trends are likely to shape the future – one of them being the rise of passive and alternative investment. Passive investments are investments that are considered for the long term. You buy something and hold onto it with hopes that, in the distant future, it will give you a positive return. This is called passive investment. Like everything, there are some pros and cons. These are low-risk options, so the returns are also pretty low. But at least they are safe, so your hard-earned money is less likely to crash.
On the other hand, alternative investments are high-risk, high-reward options. This refers to non-conventional methods of investments such as private equity or venture capital, hedge funds, arts, antiquities, cryptocurrencies, NFT, etc. The market for trading these non-conventional assets can be narrow, so there are few options if anyone wants to sell/trade these assets. However, there is also a massive potential to gain a ludicrous return. This is why people lean towards alternative investment even though some risks are involved., Therefore, it is a good idea to diversify the investment and get the maximum value for money.
Conclusion
The world of investment is changing rapidly. Potential investors should stay up to date with these changes in order to keep up with the rapid pace. Otherwise, it would prove financially disastrous for them and their investments.