Trends you can bet on
You can never tell what will happen tomorrow but you can attempt to cash in on some changes that are projected to take place in the long term.
Financial analysts say investments in changing demographics, alternative energy, technology trends, and emerging markets are poised to generate high returns over the next 10 to 20 years. Investment products such as mutual funds, exchange-traded funds, bonds, and stocks provide an avenue to capitalise on these opportunities to reap profits down the road.
Health care and pharmaceutical industries seem to be a good long-term bet given population trends. Mayberry Investments' Assistant Manager, Research and Special projects, Richard Deane pointed to a report done by the population division of United Nations Department of Economic and Social Affairs which focused on "world population ageing: 1950-2050".
"The report made the claim that the 21st century will witness even more rapid ageing population than centuries before," Deane said. "This demographic change presents opportunities for investors who are looking for long-term trends."
As population ages, the demand for health care and pharmaceutical products increase, Deane advised.
But though we have an ageing population, we have a growing one which we have to feed, added Adrian Haye, research analyst at Barita Investments.
Also, while there is excess food in some countries, it won't necessarily be shared, so investing in companies that develop farming machinery can be considered, Haye said.
"Companies that sell fertilisers, seeds and irrigation machinery are ideal," said the Barita analyst.
Population trends bring even further opportunities. According to David Mullings, there will be increased strain on clean water supplies and energy production issues. The chairman and chief executive officer of Keystone Augusta said it means that conversation, new sources of reliable power and ways to address water shortages will present opportunities.
"Companies focusing on these problems, especially those with solutions that are affordable for developing countries will reap significant gains," said Mullings.
Alternative energy, based on Haye's reckoning, will be good going forward.
"As energy consumption increases, the price of oil also rises," he said. "It will be seen as a viable option."
Technology is an area that is also projected to reap significant gains.
According to Mullings, analysis of large amounts of data and mobile application development for internal deployment continues to gather pace. But, he said, there are potential setbacks in the technology industry because it has not yet fully matured.
"It is also impossible to predict the winners, but you can mitigate risk with due diligence and understand how defensible the product or service of the company is, such as having patents," he said.
Technology is such a rapidly changing industry, "it could become a monster", Haye said.
It is a good idea buying into companies that have a propensity for innovation and expansion, he noted. Emerging market bonds, and companies that are expanding into developed countries, are attractive options as well, Haye said.
Analysts warn investors not to put all their 'eggs in one basket'.
"No investor should get carried away and invest all their money in any one long-term investment, instead investors should look to diversify their portfolios," Deane said.
What's more, with health care, legislation can derail your investment, Haye said.
Notwithstanding, Deane said studies have shown that long-term passive investing tends to yield relatively larger returns than short-term active investing.