If you remember one thing about pension investing, let it be this, says Eleanor Laise in Smart Money: “diversity”. To reduce risk and increase returns you will need a portfolio that includes large-cap, mid-cap, small-cap, foreign and domestic funds as well as cash, property, bonds and even commodities. A lot of these investments will need to be with you “for the long haul”, says Jay Palmer in Barron’s. When you are looking for equities, for example, you need to be looking for ones that you can hold for ten years or more, “racking up handsome, sometimes giant, gains while minimising brokerage commissions”.
So how do you choose them? The answer is the very straightforward approach recommended by Jeremy Seige, professor of finance at the Wharton School and author of Stocks for the Long Run. He recommends picking themes likely to be important over time and then finding promising companies at reasonable prices that have exposure to them.One of those themes is going to be health and biotech: “if we’re really going to live to be 100, we’ll need all the help we can get”. In the US, that means looking at firms such as Medtronics, a medical device maker.
Another theme to consider is the baby-boomers children (Gen Y): they’re as numerous as their parents and have started exerting their own influence on the economy. Sony could be a “great play on this crowd”, given the gadgets, games and movies it offers. And not just in the West: the firm’s “stylish gear” means that it “should attract plenty of followers in China, too”. It’s also big in the growing field of robotics: insiders say the firm may be better known for this than televisions within 20 years. Other themes to look at include the possibility that global oil production may soon peak (that should help everything from small exploration firms to BP) and the rising wealth levels in emerging market economies.