Too often in investing we pick a share, check its P/E ratio and its dividend yield, check if theres any bad news that might put us off buying-in, and then if all is fine we take the plunge.
But Ive consistently said that we need to take a step back, look beyond the numbers,and see the big picture. What are the key trends that you should consider when investing? What are the background themes that could make all the difference to the companies you buy into?
Well here are five trends that I think you should seriously consider when investing.
Emerging markets
We used to call them the developing world. Then we called them emerging markets. To a large extent, theyve now emerged. China is the worlds second largest economy, and India isnt far behind. Then theres Brazil, Saudi Arabia, Malaysia and South Africa.
This is a world that, instead of being dominated by America and Europe, sees the wealth more evenly spread. But this has created new challenges.
Many of the Wests industries are facing fierce competition from the East. But these new companies present opportunities for investors to take up. Investors can no longer be insular, and must keep their eyes open to investments beyond Britains shores. I firmly believe that emerging markets should be a key part of your portfolio.
The global consumer boom
A knock-on effect onincreasing global wealthare the burgeoning ranks of the worlds middle class. These people are consuming as never before.
Thats why investors should invest in companies that take advantage of the consumer boom that were just on the cusp of, whether youre talking about fast moving consumer goods manufacturers, fashion retailers, global banks or fast-food retailers.
Technology
The technological revolution of the past 20years has transformed the way we work and the way we play. It has changed the way we organise our finances, the way we do business and the way we communicate and socialisewith each other.
Thats why investors should look to buy into tech companies, and also consider the huge impact on industries that range frombanking and insurance andtelevision, to postal services and the High Street.
Healthcare
The worlds population is rapidly growing, and ageing, and global wealth is also surging. That means that the demands on healthcare systems will increase, and the spend on pharmaceutical products will continue to push ahead.
Investment gurus such as Neil Woodford have said that theres still great potential for healthcare companies to grow. I firmly agree with him. Invest in pharma firms with a stake in the latest biotechnologies, and in supplying blockbuster drugs to the worlds consumers.
Energy and mining
Alongside these high growth areas is a sector where a long-running boom is coming to an end. Since the turn of the century, commodities stocks have been on the rise, but profitability is now on the wain, and share prices are falling. This sector is now entering a bear market, and is to be avoided.