How Megatrends Can Shape SIPs, Asset Allocation, and Portfolio Building

The world we live in is changing rapidly in many ways. Technology is growing quickly, life expectancy is increasing, the climate is changing, and new markets are opening up. All these big shifts are called megatrends, which are powerful forces that shape the economy and our future.

As investors, we can use these megatrends to guide how we invest our money, through asset allocation and portfolio building. Let’s explore some of the ways in which we can incorporate megatrends and investing.

• Table of contents

• What are megatrends and why they matter
• How megatrends can shape your SIPs
• How to use megatrends to plan your asset allocation
• Building a portfolio with the future in mind
• What new investors can do

What are megatrends and why they matter

Megatrends are large-scale changes that unfold gradually but have a wide-ranging impact on societies, economies, culture etc. These are not passing phases; instead, their effect is long-lasting and they can reshape the world we live in.

These are a few examples of megatrends:

• Technology and digital growth: More people are using the internet, smartphones, and digital payments.
• Green energy and climate change: A move from oil and coal to solar, wind, and electric vehicles (EVs).
• Urbanisation: More people are moving to cities, creating demand for better housing and transport.
• Ageing population: In many countries, people are living longer, which means more need for healthcare and retirement services.
• Rising middle class: In countries like India, more people are earning more money and spending on better products and services.

These trends matter because they show us where the world may be headed. And, if we invest in the sectors or companies that are part of these megatrends, we can potentially tap into lasting growth potential over time. According to a report by the Organisation for Economic Co-operation and Development (OECD), long-term public investment strategies are increasingly being shaped by global trends such as urbanisation, climate change, and demographic shifts, including ageing populations.

How megatrends can shape your SIPs

A Systematic Investment Plan (SIP) is a convenient way to invest small amounts regularly into mutual funds. For many investors, it is both easy and wise to combine the convenience of SIPs with the potential of megatrends. Let’s take a look at how this can be done:

• Choose mutual funds that follow megatrends: Look for funds that invest in technology, healthcare, renewable energy, or infrastructure. These are areas likely to grow in the future.
• Stay invested for the long term: Because megatrends take years to play out, SIPs can be suitable as they allow you to invest over time and navigate market ups and downs.
• Diversify across themes: Don’t put all your SIPs into one sector. For example, invest in a mix of tech, energy, and consumption-based funds that reflect different megatrends.

Also Read: What is megatrend investing?

How to use megatrends to plan your asset allocation

Asset allocation refers to how you divide your money across different types of investments, like stocks, bonds, gold, and real estate. Megatrends can help you decide how much money to put where.

• Focus more on equity if you're young: If you’re investing for the long term, equities (stocks) linked to future trends can offer potential for wealth-building in the long-term, albeit with higher risk than fixed-income products.
• Include thematic funds: These funds focus on specific themes like electric vehicles, artificial intelligence, or green energy.
• Add a global angle: Some megatrends are global, like digital innovation. You could explore funds that invest in global tech or healthcare companies.

Building a portfolio with the future in mind

When you’re building your investment portfolio, it is a good idea to think about what the future might look like. A megatrend-based portfolio is one that is forward-looking and stays relevant over time.

You can use the following tips:

• Balance between stability and growth potential: Have a mix relatively stable options (like fixed deposits or debt funds) and megatrend-aligned equity investments.
• Think in themes, not just sectors: Instead of only looking at IT or pharma, think broader, like digital change or an ageing society. This can result in more diversification.
• Review your portfolio every year: Megatrends evolve. Make sure your portfolio keeps up with the changes.

Also Read: What is Investing vs.Trading?

What new investors can do

If you’re new to investing, some of these things might sound complicated. But, you don’t need to be an expert to invest in megatrends. You only need to be curious and consistent.

• Start small with SIPs in mutual funds linked to megatrends.
• Understand the world around you: What are people using more? What problems is the world solving?
• Ask questions like “Will this company or sector grow in the future?”
• Be patient: Remember that investing is a journey and results neither guaranteed nor instant.

Megatrends are like road signs showing where the world is going. If followed thoughtfully, they can inform decisions about where to allocate your money and make your investments more forward-looking and aligned with long-term themes.

At Bajaj Finserv Asset Management Ltd, we aim to harness the power of megatrends by offering investors access to themes shaping the world’s future — from clean energy to technology, innovation, demographic shifts and more. Many of our funds follow a megatrends investment approach to help you participate in these long-term shifts, with a focus on growth potential and diversification. Build your future-focussed portfolio with Bajaj Finserv AMC.