Some industries grow. Others fall by the wayside as the world moves on. Picking the industries of the future to invest in can be financially rewarding.
Our demographics are changing as the population ages. Technology is revolutionising our lives. Natural resources are under increasing pressure. Economies are transforming themselves to cope with demands of the modern age.
All of these things will affect investment markets in the next 20 to 30 years and beyond.
Change and pressure on resources will create winning and losing investments. Investors who pick the correct growth industries and put their money in for the long term can expect to build capital.
The ageing population is resulting in a rapidly changing market for goods and services. According to the Ministry of Social Development, the number of over-65s will double to about 1.2 million by 2035. That will be almost a quarter of New Zealand's population.
The most obvious commercial beneficiaries of New Zealand's changing demographics are retirement village builders such as Ryman Healthcare, Summerset Group Holdings and others. They're doing nicely on the back of our greying population. The future is also rosy with more and more potential customers coming their way.
There is an argument that the perceived future growth in the sector is already factored into share prices, says Norman Stacey, director of Diversified Investment Management Systems.
But not everyone agrees. Mark Lister, head of private wealth research at Craigs Investment Partners, believes there is long-term growth potential in companies such as Ryman, especially if they expand into Australia. But he says if you are looking for a big share price gain in the next 12 months, you'll probably find better opportunities elsewhere.
Demographic changes here and overseas are going to fuel other industries such as pharmaceuticals. Older people consume more medicines and treatments. And as new cures are invented, we buy more medicines.
Related growth areas include nutraceuticals (foods that provide health and medical benefits such as manuka honey), says Stacey, although it's a market prone to having big winners and losers.
Lister cites immunotherapy, a treatment that uses your body's own immune system to fight disease, as another growth market. The ageing population combined with growing affluence in Asia and elsewhere is driving these industries worldwide.
Another long-term growth story, which benefits from that increasing affluence, is food. In particular, the demand for protein is increasing rapidly, says Stacey.
New Zealand is in an ideal position to meet that need. "We have seen the Chinese clamour for dairy-based baby formula," he says.
It's not just formula milk Asian consumers want from New Zealand. Stacey was astounded on a recent visit to Thailand, for example, to witness huge demand in that country for New Zealand green-lipped mussels. He was also surprised to find branches of New Zealand Natural ice cream in relatively small centres in Thailand. The company also has outlets in the Philippines and China.
New Zealand fishing-related investments are also benefiting from rising demand for protein. On his Thailand trip Stacey noted the premium price commanded by sea-caught fish. This is good news for the likes of Sanford. "Asian waters are massively overfished and we have a world-leading fishing management system," he says.
Another area where there will be future growth is alternative energy. It's a risky business to be in because it would be very easy to back an also-ran technology.
Technological issues continue to hold back some alternative energy sources, says Stacey. "Until there is a way of storing energy, hydro and thermal are still going to be cheapest."
Falling oil prices have taken the heat off alternative energy development at the moment, says Lister. Nonetheless, he does expect to see longer term growth in this area.
Water is a resource that's become the darling of futurologists. The world has a water shortage, says John Berry, director of Pathfinder Asset Management. Population growth, particularly in equatorial countries, is compounding the problem. There is both a physical scarcity and an economic scarcity, says Berry. The latter is due to the fact that it often costs too much to get water to where it is needed. Rather than investing in water sources, the Pathfinder buys shares in the providers of technology and other related companies.
Future growth industries aren't just limited to the ones mentioned here. Some often cited include recycling, robotics, green tech, genomics, agritech and battery technology. The inexorable march of technology isn't going to slow down.
There will be spin-offs in other traditional industries. Some crystal ball gazing is needed. What happens, for example, when retiring baby boomers want to see the world one last time before they die? The travel industry benefits. What will happen if boomers want to get fit? Will the personal training industry boom?
But there's risk in trying to anticipate new industries to invest in. It's easy to back the wrong horse. What if you'd put all your money into MySpace or Bebo because you thought social media was the thing of the future? You might now be a bit sick at the sight of Facebook and Twitter. For every technology company that succeeds, many don't.
Tomorrow's winners may not even have got off the ground yet. In pharmaceuticals, for example, it's not easy to know if it will be GlaxoSmithKline, Roche Pharmaceuticals or some outfit no one's never heard of, says Lister, that launches the next miracle product. Who knows who might come up with the anti-ageing hormone replacement therapy that everyone will want.
It's for this reason that many investors either choose to or would be better off buying into managed funds or exchange-traded funds. These either hand pick companies with growth potential or follow an index such as the S&P Global Water Index.
The managed fund option gives you the chance to be choosy about what you want. If it's water, for example, but you don't want to invest in water reserves themselves and want a socially responsible investment, there will be a fund for you. In this case Pathfinder has a New Zealand-based one. But if your interest is different there will almost certainly be an Australian, US, UK or other fund that meets your criteria.
What's more, there are few long-term growth companies on the NZX, says Lister, which means many investors have to look overseas.
You're more likely to find strong mature companies here. There are some exceptions such as Ryman, Xero and tech companies such as Vista Entertainment Solutions, Wynyard Group and SLI Systems.
The biggest growth companies in the world are overseas. Investors can buy into them directly. But sometimes it's easier to buy fund-based investments when it comes to other markets.
Growth investing isn't for everyone. Future growth industries often pay no dividend at all - reinvesting profits to grow. If, like some of Lister's clients, you're a 20-something-year-old lawyer earning good money with long time horizons and an interest in all things modern, then these growth industries could provide opportunities.
If, as Lister points out, you're a newly retired 73-year-old Taranaki farmer, you probably don't want to invest in industries with 20-30 year growth horizons. You're more likely to be looking at established dividend-payers to put your money into.