Every now and then, it's always fun to look into the future and imagine what the financial markets will look like 5, 10 or even 15 years from now. (And what better time than a summer weekend in August?) In the current issue of Business Week, Ricky McRoskey looks at the future of investing in the year 2020. The easy answer, of course, is that financial markets in the year 2020 will be even more global than they are now, more transparent and more driven by individual investors: "The experts foresee a world where investment banks will look more like government-backed depository institutions, mutual funds will be fewer, and stock exchanges will become international with super-governmental bodies regulating them."

Wharton finance professor Jeremy Siegel (author of Stocks for the Long Run) predicts that investors will change their approach to diversification as global borders continue to melt away:

"With explosive growth in emerging markets and more companies with worldwide operations, a corporation's official "headquarters" will become less relevant... People think they're diversifying by investing in a country, and it leads to inadequate diversification, because the country of origin or incorporation is not the primary influence on the stock price. More important for individual investors will be understanding where a company produces and sells its products, since an outfit based in France but selling products in Egypt doesn't truly represent the French economy. Siegel foresees the birth of the "international corporation"—a business globally diversified in where it produces and sells goods and not identified by its specific country."

It is also likely that risk management tools for individual investors will become even more sophisticated, according to Stanford finance professor Darrell Duffie:

"Better software will let everyday investors visualize how their portfolio's risk is altered by the slightest tweak, says Duffie. Interactive charts will show investors how their risk exposure changes when they buy more Microsoft options, or hold fewer Chinese stocks, or short the price of oil. "People will click on an icon and visualize their financial future in terms of all scenarios," he says. New tools will also better reflect the correlations between different parts of investors' lives. "The idea that you just buy medical insurance on the one hand and invest in financial securities on the other will vanish," he says. People will be able to buy securities that pay off based on changes in their medical expenses, or they will be able to buy insurance against a reduction in their home value. Says Duffie: "Just use your imagination."

For members of the TradeKing Community: What other changes are on the horizon over the next 10 years? 

[images: Jeremy Siegel and Darrell Duffie]