Economists describe countries as having life stages. Emerging markets benefit from an abundance of cheap labor during a period of manufacturing growth, then move from building things to a service-based economy. Hong Kong, for example, was a center for manufacturing and progressed into banking and services.
Countries become wealthier with time because of technological advancement. Provided that investors or shareholders are treated equitably, they join the ride to wealth. The word equities is based on the concept of “equal treatment”.
To take advantage of the wealth growth, first, find a country which treats shareholders well, then look at their technology companies. Currently, the most dynamic area in the world happens to be the US. Next, discover areas of the market which tend to outperform: technology, consumer discretionary and health care. Choose the sectors of these three which is least loved or unpopular. Companies which are unpopular correlate to better returns.
The three ETF’s are:
- Technology QQQ
- Consumer Discretionary XLY
- Health care XLV
The biotechnology sector IBB should also be included as an advanced technology focus.
Historically, these ETF’s have outperformed the SPY ETF.
In the last five years, IBB and XLV have underperformed.
I think it makes sense to buy IBB and XLV if investing for the long term.
Footnote: There are still remnants of manufacturing years in Hong Kong as many of the unskilled workers reside in government-supported public housing estates. I have been to these suburbs and they are relative unhappy places.