Investing Into The Predictable Future - China, Nanotechnology, Oil, Food And Gold

Includes: FXI, GLD, MOO, OIH, TURN
by: Kevin Quon

The concept of “buy and hold,” that cherished adage that typifies the long-term investor’s approach to trading the stock market, may have come and gone according to the talking heads on TV. It’s true that increased volatility with the advent of the internet has allowed your Average Joe to become an equity holder in companies they often know too little about. And for retail investors, increased volatility likely spells havoc on the portfolios for a population that notoriously sells low and buys high despite having the knowledge of doing otherwise. Even formulated programs and high-frequency trading systems have likely moved our markets towards wider swings of the sentiment pendulum. But has the “buy and hold” principle truly become moot?

With increased volatility, investors looking to invest beyond the uncertainty of the day-to-day, need only to choose investments that can embrace the larger promise of a progressive future. Predictability, after all, is an element that pushes the odds of success towards the one who acts upon it. Investors looking to park money in a account rather than actively trading should invest in economic trends that will undeniably grow as the world continues to spin.

Here’s a very short list of a few global trends that are likely to take place:

  • China’s economy will continue to grow much faster than most of the developed right.
  • Nanotechnology will be incorporated more into the economy as technology evolves.
  • Oil prices will continue to rise as developing nations evolve into heavy oil consumers.
  • Agriculture will become more important in light of growing populations, meat-centric diets, and the need for greater crop yields.
  • Gold will continue to rise as governments around the world dilute their money supplies in order to sustain economic growth.

In order to capitalize on these trends, it’s ideal not to pick and choose individual winners that could be subjected to external factors that destroy your investment. The fund-approach, whether it be by ETF or some general investment that encompasses a collective stance to the industry, is the ideal means to invest into a long-term trend. Here are a few suggestions to consider in light of the aforementioned trends:

  • The iShares FTSE China 25 Index Fund (NYSEARCA:FXI) is an ETF that cover 25 of the largest and more liquid Chinese companies that are publicly traded. Though a bit disproportionately weighted on financials, FXI should adequately capture the trend of China’s growth.
  • Harris & Harris Group (TINY) is a venture capitalist firm that specializes in private equity investments in small-tech companies. With a maturing portfolio that is beginning to show promise, TINY might serve as one of the best diversified plays in the field of nanotechnology that’s trading on the market today.
  • The Market Vectors Oil Services ETF (NYSEARCA:OIH) is a fund that specializes in oil services sector. With oil becoming increasingly scarce, the need for services and technology to squeeze more out of less is matched with a willingness to pay more from more expensive oil. OIH should have a correlative effect with the price of oil.
  • Appropriately named, the Market Vectors Agribusiness ETF (NYSEARCA:MOO) is a fund that specializes companies that derive at least half of their revenues from agribusiness. This includes equipment manufacturers, fertilizer companies and food companies. With the need for greater crop and food outputs on the same amount of land, MOO should have a brighter day ahead of it.
  • Last of all, those seeking the relatively stable climb of gold should look no further than holding tangible gold itself. SPDR Gold Shares (NYSEARCA:GLD) is the best way to capture this trend with a 100% physical gold bullion holding. ETFs that utilize gold miners to capture the same effect can be unfairly victimized by factors outside of the trend itself.

Disclosure: I am long TINY.