Stoic VC Partner, Geoff Waring
Where you invest your savings affects the type of jobs available to your children in the future.
Most people choose to invest in the property, large cap equity or bond markets with the belief that they present more secure income and growth prospects.
What many people don’t realise is that investing in emerging technology companies has generated better returns and creates more valuable jobs for young Australians in the future.
Startups are the biggest contributor to job creation
According to the Australian Investment Council, startups are the biggest contributor to job creation in Australia, representing 90 per cent of net positive job creation in recent years.
If you invested in technology companies instead of property over the past 14 years your returns would have been substantially higher.
The Australian Securities Exchange IT index (ASX:XIJ) has risen around 18 per cent a year on average since 2006. Comparatively, the Australian Bureau of Statistics residential housing index has risen 5 per cent a year and the broad All Ordinaries index (ASX:XAO) by 4 per cent a year on average over the same period.
The new S&P ASX all technology index (ASX:XTX) reveals just how resilient investing in tech companies can be particularly through times of crisis. The index has risen 54% since its pre-Covid-19 level at end-February 2020. Meanwhile, average residential property prices declined then recovered to 17% above their pre-Covid peak.
Venture capital backed start-ups lead to emerging technology companies that offer the most rewarding jobs of tomorrow for our kids.
Graduates employed at startups backed by venture capital earn more
While large firms normally pay better wages than small firms, university graduates employed at startups backed by venture capital earn roughly 10 per cent more than graduates at established companies, a 2018 study has found.
This premium is a proxy for the more capable graduates choosing the more interesting work.
Technology companies, and especially science-based technology companies are increasingly where the best paid and most interesting jobs are.
New job possibilities
Think of the many new job possibilities created by robotics, artificial intelligence, biotech, plant genetics, pharmaceuticals, medical devices and other innovative areas.
Investing in emerging tech companies also creates jobs that are less likely to be affected by cyclical peaks and troughs and the effects of black swan events.
These tech companies need a combination of creative and analytical skills so the jobs are less likely to be automated.
Jobs such as molecular biologists, customer development managers, engineers, global marketing managers, product designers, data scientists and robot technicians.
New, exciting jobs will be less available if our savings focus on property
These exciting jobs are less available if our savings focus on property. Yet wealthy Australians, with more than $1 million saved outside their home, have about 30 per cent of their savings invested in property.
Not only is this driving up the price of housing for young people, it’s replacing the exciting, higher-paid tech jobs with lower-paid less skilled jobs in real estate (such as gardeners, cleaners, real estate auctioneers and strata managers) that are likely to be in less demand in the future because of automation.
So when you’re next taking a look at where your savings are invested, please beside expected returns, consider the kind of jobs you want your children to work in.
How your child’s future job depends on the way you invest was originally published in Stoic VC on Medium, where people are continuing the conversation by highlighting and responding to this story.