Tuesday, September 28, 2010

Vision: Profiting from long-term trends

The vision to identify major long-term trends that can possibly unfold or can continue unfolding in the future is a very useful ability for an investor to have. Investors who are able to imagine future trends can position their portfolios to profit from those trends or at least identify investments that they might consider staying away from, assuming that the trends they see taking place in the future does in fact materialize.

Fast growth in emerging markets and green technology are trends that have been going on for quite some time, and will probably keep going on for a long time to come. Demand for food and water outpacing supply is a trend that I personally see taking place in the future. But while being able to identify future trends is pretty cool, it wouldn’t mean much if we didn’t position our portfolios to take advantage of the trends we think will take place.

We can take advantage of the trends we foresee or even trends that are already unfolding through exchange traded funds, stocks, and even private businesses. Say a person has the vision of food demand outstripping supply; he can invest in food producers or set up a farm, assuming that he understands how the farming business works.

While it is possible to position our portfolios to profit from long-term trends, there’s the risk that some trends might not materialize as soon as we expect them to, that we might have pulled the trigger much too soon. So, to mitigate this risk, we should invest in companies that we already consider attractive investments and wouldn’t mind holding forever.

What are some of the trends you foresee unfolding in the future? If you have anything to share please feel free to comment. Thank you for reading and may you always sustain good returns on your portfolio. Take care.