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Tony Byrne: Future growth vs tired asset allocation

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I recently read Jim Mellon’s and Al Chalabi’s book Fast Forward in which they write extensively about the technologies and companies shaping our future. I have read a few of Jim’s books and have listened to him speak at The Master Investor Conference in Islington as well. He has an amazing ability to predict the future.

In his previous book, Cracking The Code, he predicted a golden future for biotechnology and his share tips performed extraordinarily well over the subsequent two years.

His new book explores eight growth sectors he and Al Chalabi are tipping to perform well in future years. These sectors are:

  • Robotics and automation
  • Life extension (biotechnology)
  • Internet of things
  • Transportation
  • Energy (especially renewable energy)
  • Payment processing
  • 3D printing
  • Media, publishing and education

It is hard to argue with the authors’ findings because they are well researched and well debated. Their enthusiasm and optimism appeal to me. They remind me of Winston Churchill’s famous quote: “I’ve always been an optimist; I couldn’t see the point of being anything else.”

When you compare the growth prospects of these sectors with the four main asset classes of shares, property, bonds and cash it makes asset allocation look totally inadequate, particularly over the next 10 years.

Of course, if you were to recommend your clients invest all their money into these sectors you would have to describe it as high risk. However, based on the poor prospects for asset allocation over the next 10 years, you could justifiably describe asset allocation itself as being high risk instead.

To me it is quite simple: invest clients’ money where the future growth is rather than into the tired old format of asset allocation, which is likely to produce poor returns over the next 10 or so years. Help is at hand since Jim is going to launch his own biotechnology investment trust soon.

So how do you invest in the other seven sectors? We are devising our own investment strategy that will invest in all of them. If it proves successful we may even launch it as an Oeic one day.

In the chapter on payment processing the authors discuss peer-to-peer lending and crowdfunding, which are two very high growth sectors and provide a fantastic way to raise funds for both equity and debt. Peer-to-peer lending has provided our clients with high interest returns of over 7 per cent compared with  bank interest rates of 1 to 2 per cent. Because one’s investment is pooled with other investors’ and the borrowers have to give security for their loans this is fast becoming recognised as a relatively safe way of investing.

But biotechnology remains my favourite area. I invested some spare cash into the Biotech Growth fund around 18 months ago and the share price has almost doubled in that time. I wish I had invested more.

Grasp the nettle and find alternative growth sectors for you and your clients. Enjoy the journey as it is going to be an exciting one.

Tony Byrne is financial planning director at Wealth And Tax Management and author of Wealth Magic

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