The weekend is almost coming to an end as I was writing this, I spent a total of 5 hours in the library working on a spreadsheet which I need to discuss with my boss tomorrow. I can finally settle down to write after everyone is sleeping. I chance upon MSN news on the safest industries to invest in.
The economy is changing all the time, countries are experiencing inflation and housing bubbles are building their momentum for another pop. No investment is fail-safe. Government bonds come closest to that, returns are pathetic and you need to hold it for the longest time. If the country defaults, your bond goes with it. Private companies can go down with fraud and leverage. We have seen plenty of examples in business textbooks such as the infamous Enron. Recently, we have seen Evergrande, the property developer which is taking leverage like it’s on drugs.
Some industries are less likely to fail than others. There is a lot of information to consider before we consider investing in any industry-specific fund or individual company. There are different type of US treasury bonds which is considered as safe because they are guaranteed and you can foresee the returns. For example, iShares 20 years Treasury Bond ETF is called TLT. You will notice that it hit an all-time high during August 2020.
When we look at the safety of the industry in terms of an investing standpoint, we need to be to forecast whether the product or service is going to remain relevant in the future. Take a look at Social Media, Friendster has bitten the dust, Facebook took over, then came Snap, and now the latest is Tik Tok. Who will prevail and hold the helm?
In the next 20 years, will we still need food? Definitely. Businesses within the food industry will survive and thrive. Businesses such as grains, cereals, eggs, meat, beverages, food packaging will be around for a long while. New innovative faux meat such as Beyond Meat and Impossible Foods may thrive in the future.
Fast-moving consumer goods include a wide variety of items like toiletries, detergents, soaps, cosmetics, household batteries, paper, food, drinks, and items that has fast shelf turnover will be needed. This industry is definitely safe and will very likely provide dividends growth.
The fashion industry is not something I endorsed because I lost money in this before. It will be relevant but I don’t think is the safest to invest your money with. Fashion comes and goes very fast. Maybe it is safer to consider raw materials such as cotton, linen, and silk which are used to produce clothes.
My favorite sector is the energy industry. We need the energy to run virtually everything in the world. The source of energy may change but it takes time. Fossil fuels produce excess carbon dioxide which contributes to global warming. However, we still use oil to power most of the vehicles in the market. Electric vehicles have grown and will continue to grow for a very long time. We all know the renewable energy industry is growing faster than the oil industry. However, countries realize that just relying on wind energy is not a failsafe method. Nuclear is the most efficient energy source.
The water industry will become more precious in the future because access to clean water will be limited with the climate crisis, overpopulation, and pollution. We need water, making this a safe industry to invest in. However, do monitor high CAPEX companies with negative cash flow, you don’t want to experience another Hyflux in the making.
Healthcare is necessary for all societies and advancement in technology will help to propel the industry. The way we treat diseases, cancer, and viruses is changing very fast. It presents a lot of opportunities if you take the time to understand this industry.
Within all the safest industries, you need to dig deeper to look for the greatest company to invest in. There is an opportunity cost for every investment. Don’t part your money easily unless you are convince.