Making the most of a low-growth environment: Part 1
The tough fact about the global economy is that, for the time being, so-called advanced nations are struggling to create even modest amounts of growth. At the same time, developing economies strive to maintain their present levels. Issues such as rising unemployment and energy costs continue to exacerbate these problems. The question on the mind of every investor, therefore, is how can revenue be generated in such an environment?
John Mauldin of Mauldin Economics, an online finance resource site, wrote earlier this year that investors should come to grips with this reality as soon as possible if they hope to ultimately benefit from the conditions. He cautioned that, while difficult, it's possible to establish an investment portfolio that promotes gains despite volatile risk.
Part of the equation, Mauldin postulated, is that it's tough to accurately describe growth, even with industry standards like the GDP calculation. Other methods like indices and moving averages fail to capture the breadth of the economy and the countless aspects that constitute real development. Additionally, he said that investors can't rely on models shaped by previous growth, as some may find themselves doing so fruitlessly.
"Simply talking past performance is risking your future on the unlikely prospect that the future will look like the immediate past," Maudlin wrote.
The key is to identify industries and markets that perform well even during a time when economic growth is all but slumping. In our next piece, we'll outline some sectors of the global economy and specific companies that may be worth investigating.
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