I think one of the easiest ways to invest for the long-term is by investing in businesses or ideas that have a long growth runway.
Tailwinds can provide a material boost to businesses’ bottom lines if they position their company in the right direction.
Alan Kohler from the Constant Investor wrote a piece for the ASX website detailing five megatrends that we should be monitoring:
There is a global shift from fossil fuels to renewable energy, particularly wind and solar. The cost to produce renewable energy has been plummeting.
Political point scoring has seen Australian energy prices become the highest in the world. This doesn’t really have much to do with climate – the politicians have failed households.
Mr Kohler believes the trend towards renewable energy looks unstoppable, whether it’s with the National Energy Guarantee (NEG) or not.
Some of Australia’s largest energy organisations are looking to invest more into renewable energy, such as AGL Energy Ltd (ASX: AGL). The government is looking to expand hydro power with Snowy 2.0.
Another megatrend is population growth. Mr Kohler explained that population growth is the only economic lever that the government directly controls, with the RBA deciding monetary policy.
Net migration used to be around 80,000 per annum for decades until it changed to 240,000 after 2005. Births also increased to 150,000 to 160,000 a year from 120,000 a year. A rising population and government ‘incentives’ probably helped this increase.
Population growth will support housing prices & construction with new infrastructure being necessary.
Australian household debt is currently at 190% of income and among the highest in the world. Mr Kohler described this as probably the greatest risk facing investors.
Low wage growth due to immigration and automation is putting the power into the hands of companies and away from employees. Low wage growth is keeping interest rates down, encouraging debt.
He thinks that RBA interest rates will stay where they are. Australian bank interest rates will probably trend higher due to rising US interest rates.
Resources, natural gas, dairy products, education and tourism are all sectors benefiting from Chinese demand.
China’s economy is likely to keep on providing opportunities for Australia with the rising middle class.
However, China is not a guaranteed river of gold. Trade wars and growing military strength in the Asian region is making the US uneasy.
China could stop tourists coming to Australia if it wanted to. It has much more control over its domestic economy than many western countries. It also requires foreign businesses to go into joint ventures with local counterparts.
I think one of the better ways to play the overall China theme is UBS IQ MSCI Asia APEX 50 Ethical ETF (ASX: UBP), this ETF gives exposure to the biggest 50 businesses in Asia outside of Japan. Most of the holdings are listed in China. However, China is a riskier proposition.
Technology is constantly improving the world and Blockchain technology could revolutionise a number of industries including the ASX Ltd (ASX: ASX) itself.
Efficiency of transactions and the security of data will open up a whole array of opportunities for companies that are forward thinking and use this technology effectively.
I agree that all of these megatrends could be opportunities (or risks) for investors. As long as China doesn’t turn into an economic enemy of Australia then a lot of Aussie businesses may profit.
Another tailwind that I’ve positioned a good portion of investment portfolio towards is the ageing population.
I think one of these top shares is perfectly positioned to profit from Australia’s ageing tailwinds over the coming years.
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Motley Fool contributor Tristan Harrison has no position in any of the stocks mentioned. The Motley Fool Australia owns shares of and has recommended Transurban Group. The Motley Fool Australia owns shares of ASX Limited. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Scott Phillips.