By Adinah Brown

The best trade for the next 20 years is actually a much more complicated question than it appears on the surface. You would expect it to be simple, just invest in whatever has the highest ceiling, something that might be an emerging industry or country and hold until the multiples increase.

But the practical side of picking the best trade depends on another more important factor – the person that is making the trade. The best trade to hold relies much more on an individual’s circumstances, trading tendencies, risk profile and most importantly, how much they can afford to lose.

As any financial planner will tell you, there is no one size fits all approach to investing. A recently retired man living on a fixed income is looking to invest to create a long term secure income. In his case, the security and stability of the investment and income is more important than the return. For a young twenty-something, who is expecting to be employed throughout the 20 year period, the investment approach needs to be aggressive in order to build their wealth as quickly as possible. Time is on their side, so any short term drops or fluctuations are not a problem if the expected end return is desired. A young family might also be able to weather the ups and downs, but with a shorter timeframe until the money is likely to be needed, they cannot and should not invest as aggressively. These examples really only highlight the general differences in investing, without getting into tricky details like income, personal risk profile, financial situation, etc.

So, whilst it is impossible to tell you what the best trade is for you, we can try to touch on a few ideas that might have a bit of something for everyone. Let’s have a look into our crystal ball to decide on the best trade for the next 20 years…

Shares

Actually, this is based on looking into history rather than our crystal ball. Share trading is generally considered the best way to build wealth. Your 401K, Roth IRA, managed funds and the like are all stocked with shares, with good reason. Historically share trading has given higher returns than most other investment options. For example, the S&P 500 has given approximately 10% returns since 1928. So a good conservative method is to buy a low cost ETF that tracks the market. With the ETFs available today, you can get exposure to emerging markets or different market segments, allowing you to track those that might give the best returns.

A quick perusal of potential up and coming markets and sectors all have good long term potential. China and India, countries each with more than 1 billion people, have large educated workforces. China is generally expected to surpass the US as the world’s number one economy over the next 25 years. As the momentum increases, their shares will also pick up, making them relatively undervalued considering the long term prospects. China’s wealth is creating a massive middle class, just as the US did in the 50’s, when their economy was booming. To compare, a $1000 investment in the S&P 500 in 1950, would have netted more than $87,000 in 2007, excluding dividends.

Emerging technology and Cryptocurrencies

It is scary to predict the future. Technological changes in just the last 5 years have rendered the world we live in a totally different place. Wearable technology, mobile phones, AI, driverless cars and a plethora of other technologies are still emerging. At this stage it is early enough to jump on board without expecting to overpay. Shares in Intel’s recently acquired Mobileye, a market leader in driverless technology is a strong early bet, despite having a high multiple.

Could there be a segment more emerging than cryptocurrencies? Sure, at this stage we have missed the Bitcoin-for-5-cents era, but with new exciting ICO’s happening all the time, a discerning future focused eye will give you the chance to buy something else for 5 cents. If cryptocurrencies continue on their upward trajectory, sort out regulation and safety and really emerge as usable alternative to currency, that small investment could pay off big.

Reinvesting profits / Compound interest

Find a video on the power of compound interest, and you will understand why timeframe is actually the best friend of a trader. Reinvesting profits means that your annual return will be based on a higher amount. Every year this compounds until we start talking about insane levels of returns. Whatever you buy, holding and reinvesting is the best decision for a trader over the next 20 years.

About the Author:

Adinah Brown is a professional writer who has worked in a wide range of industry settings, including corporate industry, government and non-government organizations. Within many of these positions, Adinah has provided skilled marketing and advertising services and is currently the Content Manager at Leverate.