Investing For Dummies

Investing For Dummies – Megatrends (part 1 of 3)

When I am thinking about what trend or company invest next, I always think long term. Good advice from Warren Buffett is to imagine what business or trend will exist even though you would close your internet for the next five years. One of my methods finds suitable companies or trends is to go thru megatrends and how I can benefit from those.

So, I decided to create a “megatrends in 15 years” -blog post series which will include three posts and today I will share post number #1. I will describe nine megatrends in 3 posts. I try to figure out what you as an investor or as a worker can do and benefit from the situation.

Megatrends #1: Demographics

Mainly due to new technology and development in medicines will cause people to live longer. Also, part of the trend is lowering birth rates in western countries. Lower birth rates will mean that we have elder people than nowadays. This change in mix will cause challenges to pension systems and healthcare.

In 2030, we will have over one billion people who are 65 years old or older (13% of world population). Compared to the situation today it would mean increase of 62,5%.

megatrends
Source: Forbes; “Overpopulation Isn’t The Problem: It’s Too Few Babies” – Article

Conclusion:

  • The age of retirement will increase if you don’t do anything for the situation
  • Government might raise the tax rates because there are fewer taxpayers
  • Change in demographics will provide good investing opportunities
    • Healthcare REIT’s
    • Medical companies (like Pfizer)
    • Hospice companies
    • Companies which offers care services (like Attendo)

Megatrends #2; Rise of middle-class

By the year 2030, the size of the middle class is doubled. Today around 30% people are in middle class (earning 10 to 100 USD per day). In 2030, the number is 60%.

The rise of middle-class is mainly caused by rising incomes and expectations in Asia-Pacific region. It is estimated that size of middle class in the year 2030 in Asia is 2,5 bigger than all the others combined. Today size is around the same level than in Europe.

megatrends
Source: European Union Institute for Security Studies, 2011

Conclusion:

  • People in China and India are likely to buy more expensive houses, cars, and gadgets.
  • New emerging markets will appear; Nigeria, Indonesia, Myanmar, etc.
  • New services need to be created for new middle class
  • The rise of middle-class will provide good investing opportunities
    • Healthcare REIT’s
    • Medical companies (like Pfizer)
    • Technology companies
    • Real Estate companies

Megatrends #3; Technology development

After the internet, everything has changed a lot, because the internet makes trends come and go a lot faster. And when the speed of access to information and communication increases, so will the change. So, it comes all the time harder to think which company or technology breaks through.

The next big thing what comes to the internet is the internet of things (IoT). Okay, this has come already to the most significant thing for many companies, even for the “old ones,” like Intel. Also, there might be some other spin off’s, like how we travel or how we manufacture things in the future.

Unlike some other trends, there are no clear indications of technology development directions.

Conclusion:

  • Picking stocks with clear advantages comes harder
  • You need to acquire more personal skills to increase your value (meaning you will get more salary)
  • Working periods in same company will decrease and most of us will become “consults” or temporary work-force
  • Technology development will provide excellent investing opportunities
    • Corporations offering consults
    • ETF’s which are investing in IoT companies
    • Companies providing data services

Next posts will be megatrends #4 to #6. So, stay tuned.

Regards,

Matt

 

Sources:

Forbes; “Overpopulation Isn’t The Problem: It’s Too Few Babies” – Article

European Union Institute for Security Studies, 2011.

KPMG; Future State 2030