Did you know that half of the US millennial millionaires (44 percent) live in a single state – California? The question that you probably have in mind is – do they move to California after becoming millionaires or before? But when you look at what’s happening, the answer is clear. Silicon Valley is the center of innovation and startups, so it’s not surprising that young talented people move to California to compete for the most lucrative jobs in tech. Software engineers easily make a few hundred thousand dollars here. But that’s not what makes them millionaires. Most companies use stock options to pay employees. If you are a talented employee and you work for Google, for example. They don’t want to lose you! At the core of innovation and progress is the human mind. So the best way to keep you working for them is to simply pay you with stock option. You will receive a certain amount of stocks if you work for the company for 3,5 or 10 years. A year passes or 2, and you want to change your job and work for Zuck because he changed the name of the company to Meta. You can’t! Because if you leave, your options are going to expire, you have to stay till the end of your contract to use that option. That’s primarily what makes them millionaires. In fact, when companies pay their employees with stocks, they are tax-deductible, so everyone benefits. The company creates these stocks out of thin air. They are tax-deductible, and they are worth a lot of money which makes these talented people millionaires. It’s a win-win situation. But it’s not unusual for wealth to accumulate in one city or state or in the hands a small group of people. 43.4% of the world’s wealth is controlled by the top 1%. The Pareto principle is visible everywhere.
1.Climate tech
In the late 19th century, oil, as we know it, was discovered and it has literally shaped the world since then. It led to the invention of automobiles, cars, planes, and rockets. It led to the biggest infrastructure project in the history of the US (highways) that shaped the entire country. In fact, if you go back 100 years ago, oil was the commodity that created America’s first billionaire and the world richest person. Young John Rockefeller realized the importance of this commodity and quickly started building his empire, where he literally created a monopoly in the country. His personal wealth grew in 1913 to $900 million, which was almost 3% of the US GDP. 3 percent of US GDP today is 630 billion dollars, which means back then, he was wealthier than Elon Musk, and Jeff Bezos combined. That’s why his empire was broken into 34 different companies. These companies still exist today and are leading the industry. This industry has also shaped the geopolitics of the world, where it made middle eastern monarchies enormously rich. Aramco, which is a state-owned Saudi company that controls the oil in the country, is valued at over 2 trillion dollars, and a few years ago, it was the world’s most valuable company. However, the end of oil is coming. Wendover Production has a great video on this, which you should definitely check out. ( https://redirect.is/ktq1c2t ) Despite the fact that there is still a lot of oil left, in 2019, it has reached it’s peak. The trend is now downward. Oil is going to be more and more expensive to extract which means oil prices are going to keep either rising or oil companies simple wouldn’t be able to turn a profit. Which means the demand for renewable energy is only going to rise. On top of that, climate change is a problem that dangers the entire future of humanity. These 2 factors are fuelling the climate tech industry. As oil has dominated the last 150 years, renewable tech is going to shape the next hundred years. Just in 2021, Climate tech start-ups have raised a record $32 billion globally so far. This number is only going to increase every year. So, if you want to make an investment and be sure that it’s only going to grow, invest in this industry.
2. Health care
What happened in 2020 wasn’t surprising. If you take a look at the history, pandemics has been happening throughout history and the most recent one happened in 1918. It was absolutely devastating. But in the last 100 years, as tech began to grow so rapidly, life expectancy began to rise as well. We realized that if we take better care of ourselves, we can easily live 80, 90, or even 100 years. If over 100 years ago, you would be lucky to live past the 50, now life starts at 50, and 2020 was a warning that if we stop focusing on our health, everything we have built could be destroyed in a glimpse of an eye. But that’s just one side of the story. The other is that, we can create technologies that can expand our life span. For a long time, mRNA, for example, was considered as a hoax. But Moderna came in and created the first mRNA vaccine where you don’t need to inject the actual virus but enough to use it to create similar cells. With this technology, we can create drugs faster, better and cheaper. Anyone who has invested in Moderna has made massive gains since then. However, biotech companies are just emerging. You have Vertex, Roche, Pfizer. Of course, it’s risky to make a single bet of any of these companies but you can try vanguard health care ETF (VHT). It literally holds stocks of the most prominent biotech companies such as Pfizer, Johnson & Johnson, and the rest.
3. VTI
When people recommend an ETF, they usually talk about the S&P500, but it’s not the only ETF out there. S&p500 companies are great, but they are not the only companies in the country. As of 2019, there has been 32.5 million businesses in the US, and thousands of them are listed in the stock market. So you want to benefit from not just the top 500 companies but the entire economy. Even Tesla just recently joined the s&p500, and there are plenty of great companies that are not on the s&p500. The VTI ETF aims to replicate the composition of the US equity market, providing a broadly diversified and low-turnover portfolio for a cheap fee. It captures the entire investable U.S. equity market. It has a very low fee which makes it great for long-term investments. It’s one of my favorite ETFs.
4. REITs
I have been in real estate since I was a teenager. It’s one of the industries that I absolutely love, especially for the fact that it provides stable cash flow. You have total control over it, and it keeps sending you paycheques. Of course, it requires some level of management but it’s manageable to a certain extend. However, not everyone enjoys that. A property means constant problems. You have to find tenants. Something breaks down, you have to fix it, you have to pay taxes, renovate it, and a million other thing. It’s really time-consuming. What makes real estate so social is that real estate prices keep rising. Even if they crash, they will eventually bounce back. Take the biggest real estate crash of 2008. Prices haven’t just jumped back to where they have been but have risen significantly since then. So how do you invest in real estate without actually buying any property? The answer is REITs! REITs are businesses that own and manage properties, and they are traded in the stock market. So by investing in a REIT, you are investing in real estate indirectly. But what I like the most is that there are REIT ETFs like VNQ that invest in multiple REITs.
5. Online Education
With the rise of the internet. Education has become widely accessible, especially with places like Khan Academy, Skillshare and others. We should have moved to online education long ago, but we didn’t. So 2020 pushed the entire world to move to online education, and it seems like this industry is going to explode in the next decade or so. Today you can literally access any information on the internet, learn anything from YouTube and master any skill from your favorite blogger. There are multiple ways to invest in this sector. Of course, you have traditional means such as eduction companies that are listed on the stock market or ETFs that are focused on this industry. You can even get into this industry on your own if you are good enough at something. But I prefer startups in this industry because it’s growing too fast and it has a huge potential.