The Megatrend Megatrends.
Investment strategy. Megatrends are fascinating as an investment idea because the respective story sounds so convincing. In order for this to actually become a successful investment, however, a number of rules must be observed.
When the legendary investor André Kostolany made den Führerschein, his teacher is said to have said to him: "You will never really be able to drive a car." "Why?" Kostolany asked, frightened. "Because all you ever do is look at the hood. Raise your head and look three hundred meters ahead at the road."
So, Kostolany concluded later, even at the stock exchange. "You don't have to imagine what tomorrow or the day after tomorrow can be, you have to think years ahead."
Investors who rely on so-called megatrends are behaving similarly. "These are long-lasting currents that can be well predicted by scientists and are likely to change our lives in the medium term," erklärt Achim Siller, Pictet. "We know for a fact that the number of people is increasing, that we are getting older, that we are living more and more in cities, that artificial intelligence will revolutionize the economy or that payment habits will change drastically."
This will have an impact on demand. "One does not have to be a clairvoyant to assume that structurally above-average growth rates will be possible in the future in the areas of health, biotechnology, digitalisation, Fintech, data management and cyber security. Particularly in times when the economy tends to weaken, it is of course attractive to invest there," outlines Robert Greil, Merck Finck Privatbankiers. "In addition, it is quite possible that the broad, stable upward trend on the stock markets is now slowly over. It then makes even more sense to concentrate more on special, particularly promising topics," adds Siller.
The number of offers increases accordingly. More and more funds and ETFs are offering access to these long-term ideas. "Many of these vehicles, however, also have weaknesses," criticizes Achim Siller. Above all, the fact that large topics are often broken down into smaller and smaller sub-trends is annoying to the experts. "This often no longer makes sense as an investment. The investment universe becomes too small, managers are then inclined to compromise on the quality of the companies or in the investment process." "Besides, a megatrend is evolving. Change favorites within the trend. The fund manager must react to this," adds Robert Greil.
The experts remember the megatrend of renewable energies all too well. The basic idea was right. However, those who had relied solely on German manufacturers of solar cells did not benefit from this. "This example illustrates another phenomenon," explains Greil: "Megatrends are subject to strong valuation cycles on the financial markets. The price fluctuations are correspondingly large. Think about how much capital you want to invest there and spread the sum over months, if not years. The average entry price is particularly important for long-term issues."
"And precisely because you should stick with it for a very long time, I would select trends with which I can identify myself. It is important to feel comfortable with this type of investment," concludes Achim Siller.
In order for megatrend investments to be successful, the two experts for private wealth have formulated seven golden investment rules (above). Two currently very interesting topics - Smart-Cities and Fintech - are outlined by the private-wealth partners Pictet and Robeco on the following pages. ®
How to invest in Megatrends.
Investments in megatrends are fascinating, but not easy to implement. Achim Siller and Robert Greil have defined seven rules that investors should follow.
// 01. Don't exaggerate: Megatrends should be thematic admixtures and not exceed 20 percent of the total stock portfolio.
// 02. Search Pure Plays: The respective megatrend should account for as much of the company's sales as possible. Purity is important. Anlagen in shares of industrial conglomerates that also benefit a little from jeweiligen Trend are not the right choice.
// 03 Diversification: Those who invest in megatrends are mainly active in small and medium-sized companies. Some of them will bring very high yields. Andere is likely to be displaced by further developments and lose im Kurs significantly. Weil no one can reliably predict who winners and who losers will be, a broad spread is important.
// 04. Megatrends mix: As a general rule, the narrower the investment universe, the greater the opportunities, but also the risks. It is therefore advisable to combine megatrend investments in order to achieve even broader diversification.
// 05. Hold on: If you want to profit from long-term trends, you have to remain invested for the long term and should not realize your first profits at an early stage. Es is always surprised how far the stock prices of the winners can rise.
// 06. Let the experts in: Hinter Megatrends are often complicated developments. Examples are digitisation, artificial intelligence or biotech. Anyone wishing to invest there needs special knowledge of their own. Or should this be left to the fund professionals.
// 07: Active beats passive: Trends within a megatrend change. Responding to this is difficult in an ETF whose structure is at best adapted to certain rhythms. A good manager can create a lot of added value.
Author: Klaus Meitinger