5 minute read

Diversification doesn’t just help you manage risk, it also unlocks new avenues for your portfolio to grow. Capital Group, one of the world’s largest asset managers, has some ideas on that front. Here’s a quick look at where the firm sees the biggest growth potential.

1. Industrials

Industries like defence, energy, and infrastructure might not have the cutting-edge appeal of tech, but with steady cash flows and high barriers to entry, these companies are set up for the long term. Plus, the US and Europe are pouring billions into moving their supply chains closer to home and boosting their energy security, setting the stage for a potential investment supercycle.

2. Healthcare

Healthcare sometimes flies under the radar, but it’s a sector that you would be wise to keep an eye on. In 2022, healthcare spending in the US hit an eye-watering $4.5 trillion, and as the population ages, that number’s only likely to go up. What’s more, these companies are now starting to ride on a third wave of innovation, one driven by genetics and AI (which is what our Healthcare Innovation Thematic portfolio focuses on).

3. Emerging Markets

With global growth expected to pick up again as the US starts its rate cut cycle, it might be a good time to explore emerging markets in general. If you’re interested, our Flexible portfolios let you invest in individual country ETFs, letting you fine-tune your emerging market strategy.

India stands out here, with its thriving private sector and rapidly expanding middle class. It’s on a development trajectory that mirrors China’s 20 years ago, offering potential in a variety of sectors (our CIO Insights goes into more detail).

What’s the takeaway here?

In the wide world of investing, there’s plenty of places to look for growth. And that’s good – putting all your eggs in one basket is risky. A good, long-term strategy is to diversify across a few key themes, stay patient, and let time take its course.

📰 In Other News: China goes for slow and steady

The big reveal from China’s economic planning agency, the National Development and Reform Commission (NDRC), disappointed investors who had their hearts set on yet another stimulus boost, especially given the slump in the country's property market.

Instead of a spending spree, the NDRC announced an acceleration to already-planned bond issuances to local governments. The group added that it was confident in meeting the country’s annual growth target of “around 5%”.

While the lack of immediate stimulus might create short-term uncertainty, China's emphasis on long-term strategy could ultimately lead to a more robust economy. In addition to its recently announced slew of rate cuts, the country also approved 200 billion yuan (US$28 billion) in nuclear energy projects back in August. These measures suggest that Beijing is taking a more nuanced approach – one that aims for sustainable growth rather than quick fixes.

These articles were written in collaboration with Finimize.

📖 A Little Context: China’s property woes

China's property market, once a cornerstone of the country's economic growth, has struggled since 2021. That's when the government introduced its "three red lines" policy to curb real estate debt, leading to severe cash shortages for major developers.

This slump has rippled through the economy. Despite government efforts to ease restrictions, property sales and prices continue to fall – a big reason for China's slower-than-expected post-pandemic recovery. Investors are now watching for signs of further government support that could revitalise this crucial sector and, by extension, the broader Chinese economy.

🗓️ Save the Date

Join us next week for the third part of our Master Your Finances webinar series, where we’ll demystify exchange-traded funds (ETFs) and show how they can contribute to your long-term financial goals. 

Here’s what you’ll learn:

• The different types of ETFs and how they are structured
• How to build a diversified ETF portfolio
• Common mistakes to avoid when investing in ETFs
• How to create and implement an ETF investment strategy

It will be an interactive session with plenty of practical tips you can apply immediately. ⏳ Register today!

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J.P. Morgan Asset Management is not affiliated with StashAway. It is not responsible for investment decisions for StashAway Income Investing portfolios and makes no representations as to the advisability of investing in the same. Refer to stashaway.sg/income-investing for full disclosure.