Something I have been thinking about recently is how am I planning to save for my kid(s) college, braces, etc. Setting aside a certain amount from my income is simple, what isn't so simple is how am I going to grow it over the course of their early lives so that it actually amounts to something when they need it. This is what I have come up with:
First, an important thing for me to consider is that my kid(s) will have a long time horizon for this savings account (10-20 years), so I need to think about what are the dominant themes that are changing now based on the economy, the world, and population demographics. At this moment there are several ideas I have on the future of the investing landscape.
1. Healthcare
We are seeing the largest generation in American history (Baby-Boomers) reach an age where things inevitably start to go wrong, health wise.
2. Real Estate Market Recovery
The past 5-10 years have been an unusual time for housing in America. We saw a huge boom, followed by the worst housing crash ever. I am of the belief that housing will stabilize.
3. Organic Food/Products
America has a problem; we are unhealthy as a people. We eat poor quality foods due to convenience and we have grown addicted to high fats and sugars. As people begin to (and are beginning to) realize the problems attributed with eating poor quality foods, a major shift is taking place.
4. 3D Printing Technology
I feel that the usefulness of in home 3D printing will become the next major technological advancement in our lives. Being able to make basically anything in your home at a moments notice will change everything. Already, 3D printing companies are making the technology accessible to individuals for much lower prices than were previously possible. Remember your life without a computer? Your kids will think the same thing about their 3D printers.
5. Energy
This idea has two facets: clean energy for sustainability and oil/gas transportation as a hedge in case America in fact becomes the major energy producer that it is thought to become. Clean energy is something that is just getting started, the use of solar, wind, and general conservation is a necessity for the future health of our world. On the flip side (the side my wife hates!) is the fact that America is sitting on more oil and natural gas than has really ever been seen in the world. Giant discoveries in the mid-west are being made and it is very possible that America actually becomes a net energy exporter in the future.
So, now that we have some themes for the next 10-20 years, we need to pick some stocks that will take advantage of those ideas.
Healthcare- Abbott Labs (ABT)
Abbott Labs recently divided its business into two parts and this almost always creates value for shareholders. Abbott is primarily a pharmaceutical company but is widely diversified throughout the healthcare sector. They offer solid growth and a healthy, growing dividend.
Real Estate- American Capital Agency (AGNC)
American Capital Agency is a real estate investment trust, meaning they own and trade large lots of property mortgages. This company has shown strong ability to manage risky interest rate environments and continue to produce a monster dividend for investors. The dividend is currently above 15% annually. Compound that dividend over the course of 20 years and you will have yourself a solid return on investment.
Organic Foods/Products- Hain Celestial Group (HAIN), Annies (BNNY)
Hain and Annies are interesting picks for future growth in the organic food space. Hain is the more solid company with a very wide variety of products, while Annies is a recent IPO that has been producing organic foods for years. While I feel Hain is a more stable pick for the long term, Annies has been showing very good relative strength recently and could be a big beneficiary of the continued move toward healthier eating. I think pairing them in a portfolio will give you good exposure to the organic food space.
3D Printing- 3D Systems (DDD)
3D systems is the largest 3D printing company in the world and has been producing revolutionary printing technology since 1986 (yes this technology has been around for that long!). At this point I don't think you can really go wrong with any of the 3D printing companies long term. I happen to prefer the best of breed companies for these long term picks and 3D systems is the best. They will be volatile, as all high growth industries are, but using that volatility to your advantage (buy those dips) will create solid long term returns.
Energy- Clean Energy Fund (PBW), Enbridge (ENB)
These energy choices will create growth and dividends which is a great combo for a long term investment. Both PBW and Enbridge have +3% annual dividends as well as the opportunity to expand their share price through time. Clean Energy will be volatile as it is widely impacted by government funding, but at these current prices is a great time to start gaining some exposure. Enbridge has been a growth monster and continues to rip, being the largest North American pipeline company makes them a huge beneficiary to the opportunities in America's energy production.
That's my list for a diversified portfolio for the future. It hits some major themes that I feel will play out over time and creates opportunities for capital growth and dividend growth. If you are looking to grow some funds for your kids' needs, I think you could do worse than following this simple plan.
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