A new age is dawning.
Whether you believe that a prolonged bear market is long overdue or that the markets will bullishly stampede into the year 2000, new trends are leading today's market into uncharted territory.
What will this new age look like from the investor's point of view? Here are my predictions.
Market information will proliferate exponentially.
Investors already have well over 1,000 financial-related Web sites from which to choose, not to mention the availability of real-time stock quotes and news about publicly traded companies.
A few years ago the only way investors could obtain this information was by reading the newspaper or calling a broker. Today nearly half of investors use a computer to obtain financial information, according to a survey conducted by the Securities Industry Association. That's up from 13% in 1995 - and there's no sign of its slowing.
But as the amount of information continues to grow, investors will face a new challenge: learning to use the information wisely. Information will be free in this new age, but the knowledge to use it will be priceless.
Volatility will persist.
Volatility was unusually low in the mid-1990s. But last year's market signaled a return to more typical levels of volatility, with year-over-year variations of roughly 10%.
As companies have become more efficient, new measures of economic health, such as economic value added, are taking their place alongside such conventional yardsticks as return on equity.
Many of the traditional rules to explain market behavior no longer apply. For example, Internet stocks are leading the IPO market back to health, though many of these companies are posting losses.
Volatility is likely to continue. But how individual investors react to it is the bigger question.
Globalization will exert more influence on the United States.
First the world shrank, thanks to improved modes of transportation and better communications. Now we're entering a new phase where the economies of the world's countries are becoming increasingly interdependent.
On Jan. 1, European countries introduced their common currency, the euro. The New York Stock Exchange is talking with European trading exchanges about extending the trading day in partnership with these euro- based economies. And international mergers are redefining the competitive landscape.
While globalization gives investors more opportunities, it also adds complexities. How does the emergence of China as a world power - or its threat of decoupling its currency form the U.S. dollar - affect one's portfolio? What influence will Asian and Russian markets have on the United States? How can investors monitor a 24-hour market as stocks trade around the world in a variety of currencies?
New services, new businesses, and perhaps even new industries will evolve to answer these questions and let investors take advantage of opportunities in the global marketplace.
For investors, keeping an eye on the big picture will mean looking at what is happening on both sides of the Atlantic and Pacific.
Baby boomers will continue to drive the market.
On Jan.1, 1996, the first 7,745 baby boomers turned 50. Since then, a baby boomer has turned 50 every 7.5 seconds. And by 2014, when the last of them turn 50, 78 million people will have reached that milestone.
The foreseeable future will be peak earning and saving years for baby boomers as they prepare for retirement. What's more, this generation stands on the brink of an enormous windfall as they begin to inherit their parents' wealth.
There are still wild cards, the most prominent of which is the extent and direction of Social Security reform. But baby boomers will continue to turn to the market for the superior returns to which they have grown accustomed.
Why? Because they are the first generation in which participation in the securities markets has become a populist pursuit rather than an elitist one.
Baby boomers have grown up with the markets and have become accustomed to them in a way unlike any other generation. Last year households' share of wealth in stock holdings reached a 50-year high, even surpassing homeownership.
That influx of money will buoy the markets well into the next decade.
Investors' choices will grow as never before.
Thanks to the rise in computer and communications technology, consumers have new avenues of access to the financial markets.
For example, 22% of all trades are conducted over the Internet and on- line accounts total nearly $700 billion. And the Securities Industry Association study revealed that three of 10 investors who do not trade on the Internet say they may do so or are likely to do so in the next 12 months.
With prices falling to commodity-like levels, it's no wonder that a wave of consolidation has swept through the industry. But rather than limiting choice, consolidation has and will continue to create more well-defined choices for consumer.
While on-line investing has carved out a niche for itself, other investment options will continue to flourish as well. More than 70% of investors indicate that they want at least some help in making their investments.
But for those investors with the knowledge and experience to make their own investment decisions, on-line accounts offer economy undreamed of just five years ago.
And for those clients who are looking for best-of-class advice and services, staking out the middle ground is an independent group of investment houses.
With more choices than ever before, investors are the clear winners. Some will choose to buy all their financial products and services from one company. Others will benefit from the convenience of conducting their trades on-line. And as information, speed, and globalization make the world more complex, premium advice will continue to have a high value to all but the most knowledgeable investors.
Those investors who will prosper most in the new age are the ones who can step back, look at themselves, and thoroughly understand their investment knowledge, ability, and goals.
What advice would I give investors today?
Do not mistake information for knowledge. Successful investing takes thorough research, a complete understanding of financial markets and products, and the ability to act decisively in light of your personal situation.
Know yourself. Investing is not a one-size-fits-all business, and investors should not settle for that approach unless it truly meets their needs. One of the best "investments" you can make is to do your homework and find the right investment medium to help you meet your goals.
Make a commitment to discipline. Develop a sound financial plan and stick with it. It is easy to be bullish on the market when it is soaring. Those investors who will profit the most, however, never lose sight of the big picture, even when the markets inevitably head down.
Investors who develop and maintain these characteristics should fare well in the new age of investing.