Over on Quora, I was asked to respond to a question about investing over the next decade …
In the next 10 years, what new industry will be worthy of our investment?
It’s a great question, and one that’s not ridiculous to ask. (And trust me, some of the questions on Quora are ridiculous.)
But I took a slightly different angle when answering it, which I think answers the question while still staying true to our investing philosophy.
How Should I Invest for the Next 10 Years?
OK.
I’ve got the answer for you, and I think it will surprise you.
But here’s the thing.
You’ve got to look at your question in a slightly different way, and accept one thing as truth. And you have to promise to hang with me throughout this whole answer.
Ready?
Actually, hold on one second.
There’s a lot of context missing from your question, so I going to put my assumptions out there.
I’m assuming:
- You’re looking to find an industry that is primed for growth over the next 10 years
- You’re doing so because you have some amount of money (maybe a lot, maybe enough to lose and still be OK) that you want to invest with and get a good rate of return
- You don’t have any specific knowledge or connection to a particular industry, whether it’s something you work in or through a hedge fund or the like
Knowing that, I’m going to give you two options for your money.
Investing in either is worthwhile, will get you a return, and doesn’t require any kind of specialization or industry-specific knowledge.
You’ll have to decide which to invest in, based on your comfortability and your long-term outlook.
OK, enough beating around the bush.
You’ve got money, you’re looking for a return on your investment — you just don’t know where.
Here are your two options:
- Invest in yourself through education — whether formal classes, on-the-job training or online courses in topics that interest you; or
- Invest in the American economy through the stock market — automatically invest in low-cost index funds from a reputable provider like Vanguard
Oh come on dude, that’s not what I asked.
Well, I understand your point. But hang with me for a minute. (Remember, you said you would.)
Here’s the absolute truth I told you that you’d need to know.
No one can predict the future. No one.
Well, maybe this guy can. But he’s actually been there, so he’s not really predicting it.
Anyway, back on topic.
No one knows what industry is going to have a huge return on investment over the next 10 years.
We can guess, for sure. You might think electric cars are worth betting on. You may think that automation has a lot of promise.
You could also see the incredible fast rise of the fidget spinner industry right now and bet your life savings it’s going to continue … but I wouldn’t.
We don’t know the future. And anyone who tells you that something is a sure-thing has no clue what they are talking about.
But here’s what we do know.
Investing in yourself has the biggest ROI (return on investment) you can see.
Let’s talk about formal education for a minute.
I’m not hung up on going to college as the only path — because it’s not, and because of the student loan debt that often accompanies it — so you should absolutely consider other options, like online courses or on-the-job training.
But here’s a few stats worth considering:
- “Over the course of a 40-year career, you may earn as much as $1.7 million more with a bachelor’s degree than you would with just a high school diploma.” (source)
- The earnings gap is getting bigger. “In 1979, people with only high school educations earned 77% of what college graduates made.” Now, they make 62%. (source)
Investing in your education pays off.
I’m educated already, so just tell me about the stock market.
OK, you’re the boss. Let’s do it then.
If you’ve got money to invest, don’t pick an industry or a specific stock to invest in. Stock picking does not work.
You know how I know?
Because monkeys can pick stocks better than experts.
Seriously. Go read that article if you don’t believe me.
What you do instead is buy entire indexes (like the S&P 500) that track the growth of a number of companies. These are called index funds.
They aren’t actively managed — no one is deciding what to buy and what to sell — which keeps their fees incredibly low.
Your investment grows as the economy grows, and over the course of time, the US economy has done nothing but grow. (Read this Quora answer I wrote to see more on that.)
Now look. Ten years is not an incredibly long time period, so you can’t be as aggressive as you could if you were planning to invest for 30 years, but here’s the thing:
There’s only been five 10-year periods where the S&P 500 actually went down, and that was during the Great Depression and Great Recession. (source)
When you invest in the stock market, you’re betting that the American economy will continue to grow — as it has throughout history.
So you’ve got some money to invest?
These are your options.
Choose wisely, and congratulations on thinking to the future.
Photo by rawpixel.com on Unsplash
