Brave young investors who are willing to boldly go where few have gone before have the chance to achieve out-of-this-world returns.
Investing in the new technologies and innovations that have the potential to shape our futures can reap huge rewards.
But it also comes with high risks, because there is no knowing whether these companies will fulfil their potential or not.
However, although it may feel counter-intuitive to take risks with children’s nest eggs, youngsters are among those best placed to take a punt on futuristic investment choices. That is because they are likely to be invested over a long period – usually several decades – and so have plenty of time to ride out the inevitable ups and downs along the way.
You can invest up to £9,000 a year through a Junior Isa for children and grandchildren from when they are born, and they can’t access the money until age 18.
Of course you can put it in cash as well as investments, but this curbs the potential for interstellar returns.
Hamish Maxwell from the Scottish Mortgage Investment Trust, which seeks out the firms that could shape the future, says: ‘Few companies can say that they might change the course of human progress, but some really are rejecting the status quo and building new industries from scratch.
‘It’s a risky strategy and some companies will fail, but having a long time horizon in which to invest is important. We focus on what the world might look like in 2030 and beyond.’
Flying taxis
Joby Aviation recently announced a partnership with Richard Branson’s Virgin Atlantic
It may sound like the stuff of sci-fi movies, but Joby Aviation is creating electric air taxis that it hopes will one day save commuters a billion hours every day.
The aircraft looks like a cross between a drone and a small plane, with six propellers that allow it to take-off vertically and travel up to 200mph.
It is powered by electricity rather than fossil fuels and can fit a pilot and four passengers.
This year they are set to become available to the public in Dubai, where the firm claims it will reduce travel time between the airport and Palm Jumeirah island from 45 minutes by car to 12 minutes. The firm also recently announced a partnership with Richard Branson’s Virgin Atlantic, with the hope of bringing the service to the UK – starting with connections for passengers between Virgin’s hubs at Heathrow and Manchester airports.
‘Once people realise how safe and cost-effective it can be, we think any trepidation will give way to excitement and demand,’ says Maxwell. Joby Aviation listed on the New York stock exchange in August 2021 at a share price of about $5, and now trades at about $6. While the firm is not yet profitable, it has a market capitalisation of $4.75 billion (£3.6 billion).
‘In ten years’ time, a trip in a Joby air taxi could be as normal as getting an Uber is today,’ Maxwell adds.
Voice AI
Most of us have used Siri or Alexa – and probably experienced the frustration when it responds to your command with: ‘I’m sorry, I do not understand.’
But the voice-based artificial intelligence (AI) of the future will be like having a conversation with a friend, says Storm Uru, co-manager of the Liontrust Global Innovation Fund, which has returned 57 per cent over five years. ‘We view this as the next frontier in the digital revolution of AI.
‘Chatbots like ChatGPT are text-based, so voice-based options are the next step, allowing us to talk to our devices as naturally as we talk to each other,’ he says. SoundHound AI is one to watch in this space, says Uru, which connects to gadgets such as cars, phones and smart devices.
‘It will mean you can be driving in your car and tell it to wind the window up, turn on the air-con, place your order at Starbucks and then navigate you to the nearest branch to collect your coffee,’ he says.
Car makers including Hyundai, Mercedes-Benz and the brands under Stellantis are already starting to use the technology, and it is also being trialled at some fast-food restaurants to handle orders at drive-throughs.
SoundHound was listed on the Nasdaq in April 2022, and its shares have since climbed by 25 per cent to about $8.
Driverless cars
Tesla is set to launch its own ‘Robotaxi’ within the next year
Imagine hopping into a cab and being driven to your destination by… well, no one.
In some parts of America, it is already possible.
Waymo, a subsidiary of the Google-owner Alphabet, is a ride-hailing app for autonomous vehicles. In 2022, the company began rolling out a driverless taxi service, which uses sensors to navigate the streets. In operation in Phoenix, Los Angeles and San Francisco, users simply download the app, order a cab and hop in.
‘I used one and it was terrifying for the first few minutes, but you very quickly get used to it,’ says Uru. ‘People worry about safety, but if anything it’s too safe – you often get stuck at intersections because it won’t nudge through traffic like a human might.’
But there are challenges for the business, warns Michael Seidenberg from Allianz Technology Trust – the vehicles are costly to produce and there is anecdotal evidence that they don’t perform as well in certain weather conditions such as snow or heavy cloud.
‘But people are generally very positive about Waymo,’ he says. ‘It seems likely that apps such as Uber will become less relevant as these services develop.’
There is speculation that Waymo could be floated but no date has been confirmed.
Yet Tesla, which is already listed on the Nasdaq, is set to launch its own ‘Robotaxi’ within the next year – a two-person, driverless electric vehicle with no steering wheel or pedals.
Special delivery
Only a decade ago the idea of getting same-day delivery of groceries or thousands of other items at the touch of a button seemed far-fetched, but these services from supermarkets and the likes of Amazon have developed at a staggering rate.
The next step for logistics, says Maxwell, is to cut out humans from the process with delivery straight to your door by autonomous drones.
He likes the company Zipline, which started in Africa using drones to deliver medical supplies and is now moving into other countries and industries.
The firm says its electric-powered drones have so far flown more than 102 million miles to deliver more than 15 million items.
‘Its operations are rapid, reliable, scalable and environmentally friendly,’ says Maxwell. ‘This technology has the potential to transform global supply chains and offer a lifeline to remote and under-served communities.’
He believes that, in the future, drone technology will be used by households for the delivery of all essential personal goods. There is already evidence this is under way: this month Zipline partnered with the US retailer Walmart to start offering home deliveries from one of its Texas stores.
‘Drones are able to navigate the streets, skies and pavements in a way that they haven’t been able to before,’ says Uru. ‘They already make deliveries in China, and at a meeting in the US last year I watched them delivering pizzas around a company’s campus.’
Zipline is not currently listed, but is held in the Scottish Mortgage Trust portfolio.
The company is valued at $4.2 billion (£3.2 billion).
Robot butlers
Uru believes there will be more uses for robots around the home and they are likely to be humanoid – having the physical characteristics of people
Maybe you already have a robot vacuum pootling around the house or a robot lawn mower keeping the garden under control.
And robotics are already used in factories, where they can perform repetitive tasks efficiently and consistently without tiring.
But Uru believes there will be more uses for robots around the home and they are likely to be humanoid – having the physical characteristics of people.
The Chinese company Unitree Robotics is a start-up which has created a robot that can run at two miles per hour and perform some dexterous tasks – even taking the cap off a glass Coca-Cola bottle.
US-based company Figure AI, also an early-stage business, has created humanoid robots called Helix that can unpack groceries, identifying where best to store each item.
‘It’s probably a couple of years away, and it will be at a high price point initially, but by the end of this decade we will likely see robots come into our homes,’ says Uru.
One way to access a range of robotics companies is through a low-cost tracker fund. The iShares Automation & Robotics Exchange-Traded Fund (ETF) follows a range of firms that are exposed to the sector, including Intuitive Surgical, Rockwell Automation and Nvidia. It has returned 70 per cent over five years.
For an actively managed option, the Pictet Robotics fund holds a concentrated portfolio of companies operating within the sector, including the German semi-conductor chip maker Infineon Technologies and the Chinese AI firm Baidu. It has returned 88 per cent over five years, and charges 1.09 per cent.
Moving to Mars
SpaceX, a private company owned by Tesla-magnate Elon Musk, is already generating billions through its Starlink internet service, but this is hardly something to get children excited about.
However, it’s the future of this business that could really capture young imaginations, as SpaceX has cut the cost and increased the frequency of sending rockets into space.
In the future there are hopes that its systems could be able to launch larger objects, which opens potential opportunities for aspiring young space travellers.
‘It might seem outlandish, but these achievements are stepping stones to establishing colonies on Mars,’ says Maxwell.
The most valuable private company in the world, SpaceX has been valued at about £275 billion – making it bigger than Coca-Cola, McDonald’s and Walt Disney.
The company is expected to keep growing because of its monopoly-like position in the market and strong partnerships with governments and companies, which gives it pricing power, while its constant innovation makes it hard for new entrants to disrupt the market.
As SpaceX is not yet listed on any stock market, the best way for investors to get access is by choosing funds that hold shares in it.
For example, Scottish Mortgage, which has returned 45 per cent over five years, has about 3 per cent of its £12 billion of assets invested in the firm. For true space aficionados, the Seraphim Space Investment Trust invests in a range of companies operating in the sector. Its share price is down 53 per cent over three years.
Investing in big ideas
Investing in firms that may shape the future is high risk, as there is a chance they do not work out and you’ll lose a lot – maybe all – of the money you’ve put in.
Even if they do come to fruition, there is a second risk that excitement among investors drives up share prices to unrealistic levels – only for them to tumble again.
Because of this, the safest way to invest is usually through a fund rather than individual stocks. This way, an expert manager can choose the best opportunities – and might get to find out about them before anyone else.
The Polar Capital Technology Trust is a highly rated option for exposure to tech trends. Its top holdings include the cybersecurity firm Cloudflare, the chipmaker Broadcom and the e-commerce giant Shopify. It has returned 69 per cent over five years.
There are also low-cost tracker funds which follow a basket of companies involved in specific themes.
The L&G Artificial Intelligence ETF tracks 54 companies in the Robo Global Artificial Intelligence index, including the healthcare tech firm Tempus AI and Samsara, which provides software to help companies improve safety.
Whether you opt for funds or shares, such themes should only make up a small portion of your portfolio – even if you are buying on behalf of a youngster with years of investing ahead of them.
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