Innovation-led shifts have happened in many different industries and can still occur wherever improvements can be made, but the majority of recent disruption has been focused via internet-based technologies, artificial intelligence and energy markets.
Budding inventors now have unrestricted access to the most sophisticated digital tools which allow them to work from anywhere and collaborate with other experts from all over the world. Access to data and the power of internet-based technology to transform almost every industry and service has driven a marked acceleration in waves of disruption sweeping through society and business alike.
A smart investor can no longer simply follow the giants of industry and know that they alone have the ability to capitalise on new technology. We now need to look deeper into a sector to find the opportunities in companies either driving or harnessing innovation and change.
Predicting change
One of the most challenging aspects of disruptive technology is predicting where it will come from, when it might happen, and its capacity to effect substantial change. While large establishments often focus on pursuing small, incremental changes in their processes, smaller rivals or new players might develop an entirely new process or product that can render old business models obsolete or capture huge market share on a global scale with astonishing speed. The story that Blockbuster Video turned down the opportunity to buy Netflix for $50 million in 2000 is already the stuff of legend – a decision that in effect precipitated their own demise. However, being able to correctly identify one individual company destined for success is notoriously tricky.
For investors, it makes more sense to follow a theme, investing in a basket of companies driving innovation and change and harnessing all the potential for growth that change opens up. In the world of finance and supply chains, the 21st century disruptor is blockchain and its distributed ledger technology. The growth of blockchain is built on the growth of cloud computing , which emerged from the growth of the internet. The key is a need for real-time, yet secure transmission of information across the web. Discover more about blockchain and its potential for thematic investing.
Disruptive Leaders
At First Trust, we believe a thematic approach to investing in disruptive technology and its impact on consumers and industry can be a valuable source of portfolio returns. Rather than individual companies, focusing on the growth potential of powerful themes such as cloud computing, cyber security and the internet in thematic ETFs provides low-cost, diversified access to growth. Disruptive technology is a multi-faceted megatrend in the continuing story of human innovation and progress that shapes society and drives global economic growth. With the ability to foresee the impact of these advances thematic investing truly comes into its own in harnessing their power in your investment portfolio.
Access more information on investing in thematic ideas and discover our Thematic fund range.
Any references to specific companies should not be construed as a recommendation to buy or sell any securities in said companies, nor assumed to be profitable.
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