Investing in a new decade

What opportunities could the future hold?

Looking ahead to this new decade, what areas could be seen as opportunities for investors?

Emerging markets 
It is estimated that the world’s population is set to increase by 50 per cent in the next 40 years, mostly from emerging markets, which include the ‘BRIC’ countries of Brazil, Russia, India and China.

While the proportion of people of retirement age will increase in Western economies, India should enjoy a demographic boost as a large group of the populace enters the most economically active part of their lives.
Although investing in a single country is a high-risk strategy, diversification that includes holdings within the BRIC countries and other areas such as Mexico, Hong Kong, South Korea, South Africa and Thailand could become an increasing attraction to many investors.

An increase in an aging population, particularly in Western economies and Japan, will be seen as positive for the healthcare sector over the next ten years. Investors may be attracted by the potential for higher returns driven by a need to spend significantly more money by governments and the private sector in the area of geriatrics.

It is forecast that, by the middle of this century, there will be an additional 2.5 billion people in the world to feed, leading to an increase in land and food prices. With China’s shift to urbanisation and the emergence of a powerful middle class in the developing world, investors may be attracted to investment in soft commodities such as cocoa, sugar, corn and wheat.

China’s evolutionary demographic shift, when combined with the acute water shortages that China and others may suffer during this decade, could make for a highly rewarding investment opportunity.

Global urbanisation will also feed through to growing demand for construction and infrastructure and these projects should drive demand for energy. The demand for uranium is also set to continue this decade as a result of a global resurgence of interest in nuclear power.

This is positive news for investors, with the UK and other countries planning an aggressive expansion programme for nuclear energy as it is seen as one of the cleanest forms of producing energy during this decade.

A greater exposure to the semi-conductor, software, media and internet, communications and computing industries means that investors are also likely to be attracted to these areas this decade.

Although currency is the most actively traded asset class in the world, it still remains one that is largely ignored by retail investors. Will this decade see a change in investor sentiment?

Climate change and water shortages could also drive future investment returns for investors, turning their attention to themes that include water, energy, agriculture and forestry.

The value of investments and the income from them can go down as well as up and you may not get back your original investment. Past performance is not an indication of future performance. Tax benefits may vary as a result of statutory change and their value will depend on individual circumstances. Thresholds, percentage rates and tax legislation may change in subsequent finance acts.