Whatever your view on the global economy right now, put that to one side.
We ask you to do that because we’re pretty certain what thoughts are going through your mind: global economic depression, money printing, recession, slowing economic growth…and all the rest of it.
Now don’t get us wrong. We’re not saying you should ignore all that. We’re not telling you not to worry, or that everything is rosy.
But we are asking you to keep things in perspective. Because despite the scary stories about economic collapse and banker bailouts, private wealth has never been higher.
And you can bet your bottom dollar it’s not thanks to earning interest on cash savings…
For the past two years we’ve told you to buy stocks.
That wasn’t a popular stance. Especially among the perma-bears who felt cheated because we’d had a bearish to neutral stock market view for the previous year.
And it continues to be an unpopular view. There are those who still say we should tell people to stay away from stocks due to all the macro-economic problems facing national economies.
But as we showed you last week, the Bloomberg Billionaires Index doesn’t contain a single individual who made their fortune investing in cash.
It doesn’t contain a single individual who made their fortune investing in gold.
And it doesn’t contain a single individual who made their fortune investing in fixed interest investments.
How did they make their fortune? That’s right, by investing in businesses…
Fortunes are Still Made in Recessions
Now, remember what people tell you. The world is going to pot and you’ll soon be eating canned hotdogs or two-minute noodles. But what if that isn’t true? Or what if there was a simple way to avoid it?
We’ll show you what we mean. According to the Boston Consulting Group (BCG):
‘Global private financial wealth grew by 7.8 percent in 2012 to reach a total of $135.5 trillion. The rise was stronger than in either 2011 or 2010, when global wealth grew by 3.6 percent and 7.3 percent, respectively.‘
It reminds us of the saying we came up with a few years ago to describe the phenomenon of building wealth through bad times. We coined the term, ‘Fortunes are Made in Recessions’.
It’s something we apply to small-cap investing each month in Australian Small-Cap Investigator. And right now we’re taking advantage of a recession of another sort; a Japanese yen recession.
And the wealth growth isn’t over. As the following image from BCG shows, global private financial wealth is set to expand by up to 11.4% annually in some economies:
Source: Boston Consulting Group
Not surprisingly the major wealth growth is in Asia and Latin America. More surprisingly perhaps, are the forecast growth rates for Eastern Europe and the Middle East & Africa.
Thanks to those high wealth growth markets, global wealth will grow an estimated 4.8% per year going in to 2017.
So, do you still think you can’t build wealth?
Do you still think you’ll benefit from growth in Latin America, Asia, Eastern Europe and the Middle East by sticking your cash in a 4.25% interest savings account?
Growth Stocks to Make a Comeback
Look, we don’t know how to make this any more clear.
We get it that the monetary system is in a spot of bother (we know, that’s a big understatement). But we also get it that you won’t achieve your wealth goals by sitting on the sidelines and carping about it.
Let’s put it in practical terms. If you had your wealth in gold, cash and stocks, you’ll have made the following respective gains over the past 12 months: -10.5%, +5%, +16.8%.
And that’s only capital growth for stocks. Depending on your split between growth and income stocks, you can add up to another 5-6% on top of that.
This is how you build wealth. You invest in businesses. You look for the stocks and industries you believe will benefit next. Over the past year that has been dividend stocks. Looking ahead, our bet is growth stocks will provide better returns.
That’s why we’re focusing on small-cap stocks, and high-growth technology and biotechnology stocks.
In our view, as the world economy grows, wealth grows, and health improves, tech stocks and biotech stocks in particular will benefit most from this boom.
Like any boom, it won’t happen evenly. Some firms and industries will do better than others. But as a way to boost your wealth as others build theirs around the world, you can’t go past those key wealth-building sectors.
Cheers,
Kris
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From the Port Phillip Publishing Library
Special Report: Buy These Four Yen Dive Stocks Now
Daily Reckoning: Why it’s Going to Get Ugly When Interest Rates Rise Again
Money Morning: Signs of Stress in the US Bond Markets
Pursuit of Happiness: Improving Your Life Through New Technology
Australian Small-Cap Investigator:
How to Make Big Money from Small-Cap Stocks
