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With the rise of new investment opportunities, especially in the crypto realm, many long-standing investors across many different markets have pushed various viewpoints on what could be considered an "optimal" investment portfolio. While there is no such thing as a perfect portfolio, we can say that an optimized one would account for factors such as strong fundamentals or technicals. However, there is one more element that has recently been brought to the limelight. And that is the concept of a modern portfolio - but first, we focus on a traditional portfolio.
From a conservative sense, a traditional investment porfolio would have assets/companies that have been long known to have a very stable and mostly neutral market outlook. Some investors could argue that a 'good' traditional investment portfolio setup would bring decent gains - but these gains would be existent over a very long period of time (meaning decades). The trend of traditional-to-modern investment portfolios could be partially influenced by the onset of technology that has changed the speed of economic activity and markets in general.
As we move forward into the future, some investors claim that they have to adapt to new ways of thing about the market. Some say that the modern porfolio would far exceed the gains of a traditional one. But, wait! What makes a portfolio modern? And how would you define and "optimized" modern porfolio in the context of the global market. In order to answer this question, we must first know what is meant by 'modern'. In the investment sense, we could place the following assumptions:
1. The "things" that are being invested in are fairly recent companies (i.e., founded within the past 10 years).
2. These investments can encompass a wide range of asset types such as stocks, ETFs, bonds, securities, currencies, firms, et cetera.
3. The aspect of focus has to be some sort of new innovation - whether this is economical, strategical, or technological.
If we apply these three assumptions to a hypothetical modern portfolio we can say, from a rational perspective, that these investments must have some sort of stability or strong backing that would allow them to have a short & long-term bullish outlook. With this in mind, we can fully define a modern portfolio to be one that has elements that incorporates novel companies/firms/assets that focus on innovation.
The next question that begs for an answer is, what makes an "optimized" modern portfolio. The word "optimized" is subject to many factors which are dependent on investor preferences. However, if we make the assumption that "optimized" (in the financial sense) means bringing a stable amount of gains over a period of time - we can define an "optimized" porfolio as one that has both traditional and modern assets/companies which balances the risk versus stability concept. One example of a high-risk, but high-return venture is a cryptocurrency investment. Cryptocurrencies have attracted a significant amount of attention primarily because of public and institutional support.
So, why should I make the switch from a traditional investment portfolio to a modern one? The answer is that you don't need to, but you can if you want. The reason for this can be best explained by an example. Let's say that you invested in a big box retail store with international branches. The revenue due to the demand from a growing population will eventually increase over a long period of time. However, the indirect effects of technological innovations such as cryptocurrencies could possibly affect demand for retail-related services (e.g. self-services using crypto and retail-sponsored crypto machines). This can impact the rate of revenue increase over time, making a traditional investment more favorable. Of course, there are benefits if you invest in a company where the source of innovation is located, but that brings volatility into the equation which is the subject of another discussion.
I hope you enjoyed this highly-opinionated post. If you liked this, please consider supporting me. Thank you and have a great day!
