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Demographics can identify future opportunities

demographics investment

Demographics could be the key component in formulating a successful long-term investment strategy as they can be indicative of future opportunities.

Investors seeking a successful long-term investment strategy have been advised to consider megatrend demographics and emerging trends as they can be key indicators of performance, an international fund manager has advised.

Fidelity International managing director Alva Devoy noted demographics are highly predictable and thus can be considered a good barometer of what might happen to markets in the future and the investment opportunities that will present themselves.

“I absolutely love talking about demographics because in financial markets we spend so much of our time forecasting and analysing … data. Demographics is one of those unique areas, one of the social sciences that is highly predictable [because] it’s slow-emerging trends over time which we can take and use to extrapolate forward,” Devoy said.

“Slowly emerging [trends] are long term in nature and they can actually help us as investors be more long term as well.”

Unlike high-quality companies that have focused on long-term return-driven structural growth, she pointed out concentrating on short-term investment horizons will narrow the number of themes at play and overly focus on consensus estimated yield curves, including input and oil prices.

Short-term investment strategies have been thought to generate a higher percentage of returns but can lead to allocations to low-quality companies that cannot sustain their performance over a significant period of time.

But a long-term strategy can insulate investors from certain risks in the system, Devoy added.

“If you take a longer horizon in your investments and wait until the two-year phase and beyond into the five-year holding period, so much more of your return is actually driven by the fundamentals rather than the sentiment. So you are not left vulnerable to the oscillation in price and the sentiment-driven price gyrations,” she said.

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