The Secret To Predicting Which Market To Invest

Whether you are contributing to a pension or savings plan, have investible assets or are looking to invest for the first time, understanding how markets work and change is imperative. The top 10 largest companies in 1999 look a lot different to today’s top 10. In this article, we are going to illustrate how these companies and sectors have changed and how you can invest in a strategy that ensures you are always invested in the best-performing markets and keeps up with future changes.

Have the 10 largest companies changed over the past 22 years?

The dot-com boom caused huge speculation in dot-com or internet-based businesses from 1995 to 2000 with origins traced back to the launch of the world wide web in 1989. The top 10 companies based on the market cap had a mixture of tech, telecoms, energy, industrials, and consumer discretionary companies in 1999 as per the chart above.

So, how on earth could anyone have predicted that 9 out of the 10 largest companies, 22 years later, would be tech companies? Unless you have a crystal ball and can predict the future it’s impossible. The good news is there is a way to invest in a strategy that ensures you are always invested in the top-performing companies.

What do I need to consider if I want to invest in future changes?

Here at SJB, we use tools that help us screen global investment funds to ensure that they meet the following criteria:

  • Invested into multi-asset classes – A multi-asset class strategy combines different types of assets, such as stocks, bonds, real estate or cash to create a more nimble and broadly diversified portfolio
  • Invested into global markets – investing across global markets means you are invested globally across both developed and emerging markets
  • Invested into passive funds – a passive fund is an investment vehicle that tracks a market index
  • Invested into low-cost funds – a low-cost fund is a fund that typically has an annual management charge of less than 0.25% per annum
  • Invested into “fund of funds” – A “fund of funds” (FOF) is an investment strategy of holding a portfolio of other investment funds rather than investing directly in stocks, bonds, or other securities. This type of investing is often referred to as multi-manager investment and regularly rebalance the asset allocation
  • Choose a reputable fund manager – Blackrock, Vanguard and Fidelity are the 3 largest fund managers in the world

Investing in a strategy that incorporates the above criteria protects you against any future changes such as a global dominance market shift. For example, if China became the dominant player in the future. It can also protect you against a global market sector shift. For example, if clean energy becomes the largest sector over technology in the future. Finally, this strategy will ensure you are invested in the top-performing companies within the best-performing sectors and markets. For example, the FTSE 100 is invested in the 100 largest UK companies which are re-evaluated each quarter. The poorest performing companies get relegated out of the FTSE 100 and into the FTSE 250 and the top companies in the FTSE 250 get promoted to the FTSE 100. This concept applies to global indices and is a useful strategy to ensure you are invested in future changes without the need to try and predict this.

Please note, the above examples are for illustration purposes. Investment returns can go down as well as up.

This communication is for informational purposes only based on our understanding of current legislation and practices which are subject to change and are not intended to constitute, and should not be construed as, investment advice, investment recommendations or investment research. You should seek advice from a professional adviser before embarking on any financial planning activity. Whilst every effort has been made to ensure the information contained in this communication is correct, we are not responsible for any errors or omissions.

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