Why You’ll Need to Re-Think How You Buy Stocks

There’s a big change going down in the world economy.

It’s the biggest change in more than a century.

It could be the biggest change ever.

That’s a big claim. But we’ve got the proof to back it up.

It shows we were right to back these markets while most others had given them up for dead…

Look at the difference in these two reports. The first is from Bloomberg:

‘Bonds are rallying from the U.S. to Germany to Australia amid speculation the Federal Reserve will disappoint investors looking for signals it’s moving closer to raising interest rates from a record low.

‘Ten-year yields were at or near 2014’s lowest levels in 21 of 25 developed markets tracked by Bloomberg.’

Bond prices move inversely to bond yields. The suggestion is the interest rates will stay low.

Now compare that news to this report in the Financial Times:

‘India’s Tata group, the country’s largest conglomerate by revenue, has outlined plans to invest $35bn over the next three years for expansion into new areas such as retail and defence while breaking down silos in its sprawling business empire.’

What a difference. So-called ‘developed’ countries forced to keep interest rates at record lows. Meanwhile, the developing world economies are investing in growth.

Where would you rather invest?

Big gains from small stocks

OK. We get it. It’s not that simple.

We don’t suggest you sell all your Western economy stocks in order to buy into a bunch of Indian companies.

There will always be some ‘home bias’ in any portfolio.

Home bias simply means that you feel more comfortable investing in your local market. We get that. But it’s restrictive.

The Australian share market is great. There is a good choice of stocks. That’s especially true in the mid-cap and small-cap stocks. There you’ll find much more diversity than among the blue-chips.

Buying small-cap stocks is great for investors. It can help give your portfolio a big boost. And we’re not just talking about the huge gains, such as the 770% gain many Australian Small-Cap Investigator subscribers have seen from one small natural gas play.

We’re also talking about the more modest gains, such as the 51.4% and 34.8% 12-month gains on two aluminium stocks.

Or the 51.7% gain on ‘Australia’s Tesla’ — it specialises in electric transport.

Not forgetting the 149.1% gain on a small-cap medical company. We tipped that stock in May last year.

Of course, not every tip pays off. The current worst performing open position is a 53.4% drop on a company exploring for and mining gold and rare earths.

But even so, of the 34 open positions on the Australian Small-Cap Investigator buy list, only nine are down. That’s pretty good considering many investors think of small-cap stocks as being super high risk.

Tim Dohrmann, our specialist small-cap expert, has more on small-cap stocks.

Big gains from big stocks

The point we’re making is that in the years ahead, the best investment opportunities won’tcome from Aussie blue-chip stocks.

And as much as it may seem like a good idea to stick all your money in small-caps, we certainly wouldn’t recommend you do that.

So that means you have to look further afield when it comes to large-cap growth stocks.

It means that if you’re weighing up buying a bank stock, as well as looking at Commonwealth Bank of Australia [ASX:CBA] and Australia & New Zealand Banking Group [ASX:ANZ], you’ll also have to throw some overseas banks into the mix as well.

Will CBA give you the best growth opportunity to profit from Asian growth? Or are you better off buying into an Asian-based bank?

Again, we’re not saying you should sell your Aussie bank stocks now. But rather than own all four of the Aussie big banks, why not own a Chinese or Southeast Asian bank instead?

It’s something every serious investor should consider. That’s why emerging markets analyst Ken Wangdong has cast his net over Asia’s banks and picked out what he says is the best bank money can buy.

We’ll release the research and the recommendation to subscribers of our new fast-growth investment advisory, New Frontier Investor within the next week or so.

China’s market has already crashed, now it’s recovering

There’s no doubt that the world is changing.

That’s true on a social, developmental, and financial front. Barely a few weeks ago, most mainstream analysts were saying that China was a bubble about to burst.

We ignored them. We said China’s market had already crashed. We said now was the time to buy. As we say, things are changing.

People have short memories. They see how things are today or in recent history, and assume things will always be that way.

Remember, America took over as the world’s biggest economy in 1890. No other economy has ever knocked America off that perch since then.

It means there isn’t a single person alive today who knows a world where America wasn’t the biggest economy. So it’s not surprising that most people assume things will always be the same.

But they won’t. The financial landscape is changing fast. And how and where you’ve invested for the past 20–30 years will need to change with it.

It doesn’t mean wholesale change. But it does mean significant change.

Aussie blue-chip stocks have been a great earner over the years, and they will be to some degree in the future. But they won’t be the best money-earning opportunity. For that you need to look elsewhere.

Read the rest of this article at Money Morning