The Investing Conundrum: Where to Park Your Savings
Most financial news is noise. A simpler frame for thinking about where your savings should sit.
It’s a question that troubles everyone with savings.
Where to invest?
When you open the proverbial financial news, there are negative signals flying around: a global economy propped up by AI spending; automotive market share back up for grabs because of competitive Chinese EV offerings; ongoing global conflicts; a world beginning to reverse the winds of free trade. The list goes on.
All of this has a knock-on effect on private corporations when it comes to planning spend. The result is one thing — wait and see — which has plenty of known and unknown consequences across sectors.
But all of this is noise. If we zoom out and look at the bigger picture, two large trends emerge.
1. The future is informed by billion-dollar deals, not hundred-billion-dollar deals
The deals that shaped the last twenty years were, in retrospect, surprisingly small:
- Google acquiring YouTube for $1.6B in 2006.
- Facebook acquiring Instagram for $1B in 2012.
- Microsoft’s investment in OpenAI worth ~$1B in 2019.
In the same timeframe, these much larger deals also happened (or are in progress):
- AT&T and Time Warner: ~$85B in 2018.
- Netflix and Warner Bros: $82B (in progress).
You should be able to tell which of these two cohorts has had a larger impact on global markets. That should tell you something about how to assess future trends.
2. In the grand scheme of things, it is not all that bad
If you zoom out and look at human progress over the last half-century, it is nothing short of a miracle. There has been a relentless rise in average lifespan on the back of better healthcare, and extreme poverty has fallen drastically.
Countries that were struggling to ensure basic necessities for their citizens are now in a position to compete on high-tech with the West — South-East Asia, China, and to an extent India as well.
History may not repeat itself, but it keeps rhyming. India and China are well on their way to reclaiming the top two rungs of the global economic order, as has been the case for the vast majority of the previous two millennia — with the United States as a competitive third.
How to structure your bets
The United States has natural advantages in technology — the FAANG companies are already well established in global markets with smooth roads ahead, and they should continue to dominate the landscape (especially Alphabet, Amazon, and Microsoft).
Supplement that with R&D-focused enterprises in pharma, demand for which will continue to rise as incomes grow and people place an ever-increasing focus on living their lives well.
For the consumption and secondary-tech side, India is the go-to destination. Multiple SaaS startups are doing really well, alongside old-economy companies in FMCG, telecom, and healthcare.
A sizeable allocation to equities in India and the U.S., along with a small proportion in fixed-income instruments, seems like a fair structure for the future.
Not investment advice. The views expressed here are my own and may not reflect your situation. Do your own research and consider speaking with a qualified financial advisor before making allocation decisions.