Payday Loan Advice service: Invest where the middle class grows.

Sunday, September 15, 2013

Invest where the middle class grows.

In the investment world there are various strategies or criteria on which to rely to select assets where we deposit our money. Within equities (but also partially could apply to bonds and to a lesser extent to other asset classes such as commodities ) , essentially have three generic criteria :

- The analysis of company fundamentals data : Study of balance sheets, sales figures, profits , corporate governance, etc. . And all this in the past, present and future forecast .

- Technical analysis : Market psychology that interprets the graphics that make up the stock prices constantly.

- The analysis of macroeconomic trends : As a good complement to the first criterion.

Speaking of the criteria you are looking for value , one of the universal truths of investing is that if we invest in assets that have an intrinsic value greater than its price objective in the long run not only protect our heritage but also to win more benchmarks , which are usually the average of good and bad investments . Often called , as most know, Value investment strategies .

However there are other investment criteria , although not preserve much of the losses in the medium and long term also help get past the mean yields . These other investment criteria found the style often called Growth , which focus on the potential future of business growth , rather than on its current intrinsic value . Therefore have somewhat less tangible component and therefore more uncertain, or less conservative . At the ends of both strategies have Deep Value criteria and Aggressive Growth , and of course, in the middle , all the shades of gray such as GARP (Growth At Reasonable Price) . Logically , the closer we get to the criterion Deep Value, we run less risk of loss in the medium / long-term or permanent, and vice versa.

The criterion of technical analysis , the best we can say is that in the short term often correctly interpret market psychology , with a clear component autocuplida prophecy . But the reality is very stubborn , and the largest fortunes generated by the best investors in the world, never have been consolidated long-term following these technical criteria , but the fundamentals ( and saying it someone with 23 years old started in the market as broker, technically analyzing all kinds of commodities in the golden decade of the derivatives of Sherman McCoy) .

So essentially follow this criterion , and provides security to avoid permanent losses , and assures us outperform the benchmark indices in the medium and long term. In fact it is far from the value of the underlying businesses of the shares , which gives rise to aberrations such companies sell recommendations laughter and purchase prices to crazy prices . In the "positive " is the small effort required to analyze a simple graph , as opposed the complex art of analyzing the present and future value of a company ...

As for the third criterion , which follows the macroeconomic winds wherever they go , can be a good supplement to take into account not required thorough and fundamental analysis. Because in the New Normal in which we live , macroeconomics gives us a unique opportunity : The fastest growing middle class ever seen by mankind . And no one should escape a massive and growing middle class , is the breeding ground for businesses to grow , and with them the price of their shares .

We are today , in decline in developed economies , stand before the full flowering of the emerging world . Economies steadily growing and powerful, and a middle class that continues to multiply. And all this data eye with a worth of Western debt nearly half a century .

Below you will see in this chart , which I borrowed from Albert Pares, how the middle class is exploding and today, and for the next 15 years.

As you can see on the map , the massive growth of the middle class is occurring primarily in Asia. Which brings us to a logical conclusion and easy : Today and in the coming years, the best corporate yields are going to find in companies located and / or majority interests in areas ranging from Turkey to Brazil , to Russia, Middle East , India , Malaysia, Thailand , Vietnam , China , Philippines , South Korea , Chile , etc. .

Returning this demographic and economic explosion as a more macro approach , we conclude that a search strategy of value and / or growth at a reasonable price ( GARP ) , in the area that we marked on the map as "Asia Pacific" , will be the most successful for years .

Unfortunately , for Europeans, the center of the world is left far behind. And as you said the Paramés admired , the distance between the manager (or coach investments) and the companies in which it invests , is inversely proportional to alpha going to get. That is, the farther pretend invest may be less exhaustive knowledge of the businesses in which we invest , and therefore get less performance over time. But to avoid this handicap of distance , we have a perfect solution , but only available to the best informed . And none other than investment through funds managed locally in those countries, star managers who live there, and have proved to know to find value in their investments for years.

But beware, there is another problem: That most of the best mutual funds in these markets are not registered for sale in Spain . Do not forget that as we said in " Investment funds and the mother who bore " , only 10 % of the funds in the world , recorded in Spain for sale. And the best funds in these emerging markets , to the " Bestinveres " of these countries , unfortunately Spain is too far away . And the weight of Spanish investors , not worth the effort to register in our country (just as Bestinver such as Exchange or Sicav ElCano not recorded in Indonesia or Hong Kong to be marketed there) .

Therefore, not enough to know how to choose the best managers in the emerging world , but you also have to have investment vehicles that allow us to access them as if deferring taxation of any background nontransferable corner bank concerned.

In conclusion , given the huge growth being experienced by the middle class in Asia , this has become fonómeno already (and will continue in the next decade ) in a macroeconomic criteria essential that we add to the ongoing search for business value . Today is imposed recommendation to invest in the best fund managers with strategies Value / GARP , wherever it is producing the miracle of capitalism : In the emerging world . We are witnessing the massive creation of an emerging middle class that soon will comprise 70 % of the population of the entire planet .

As investors we can not afford to miss it , and would do well to procure good advice that we select the best local funds and a tax jurisdiction and proper vehicle in which to deposit such investments. The growth of the world and of our heritage is there , far away, but still within reach of the best advised .

P. D. For those of you interested in Value initiate you in strategy , I recommend this light and cheap booklet Alvaro Vargas Llosa ( son of the famous writer Mario ) . Not that what we subscribe in full, but we consider it very educational and accessible for investment neophytes Value.

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