These long-term trends in demographics, politics, and economic policy are global in nature and tremendously powerful, and investors can profit as these trends unfold using select ETFs.
Over the last several years, ETFs have become popular tools for active investors seeking to take advantage of short-term mispricing in the market. The average daily trading volumes on many of the most popular exchange traded products clearly indicates that ETFs are widely used by daytraders who measure their holding periods in minutes rather than years.
Of course, ETFs also continue to be tremendously powerful tools for the group for which they were originally designed: long-term, buy-and-hold investors. For those in it for the long haul, ETFs can represent a way to tap into a compelling investment thesis that is expected to play out over the course of several years or even decades without conducting company-specific research or taking on considerable company-specific risk.
Below, we outline five long-term trends that are expected to play out over the next several decades. While each of these investments could experience some short-term volatility, they are uniquely positioned to thrive if the related long-term trends unfold as expected.
India Is Urbanizing and Middle Class Is Growing
Trend: Like many other emerging markets, India is experiencing a significant demographic shift. The Indian population is moving from rural areas into cities at a breakneck pace. Currently, only about 31% of India’s population lives in urban areas, but that figure is expected to climb to 40% by 2030. That translates into an additional 225 million urban residents over the next 20 years or so.
The ramifications of this urbanization are important. As Indians flock to cities, many are taking on better-paying jobs, joining the middle class, and, for the first time, possessing discretionary income. That swelling middle class is causing demand for items such as cars, televisions, and other discretionary goods to skyrocket, and this corner of the market should continue to expand for the foreseeable future.
ETF Idea: There are a number of India ETFs on the market (as well as an India ETN), but perhaps the most appealing way to tap into this trend is the EG Shares India Consumer ETF (INCO). This ETF holds 30 of the largest consumer companies in India, including manufacturers of personal products, carmakers, entertainment companies, clothing companies, hotel chains, and tobacco stocks. In other words, INCO’s portfolio consists of the companies that are positioned to profit from increasing discretionary spending and a growing Indian middle class.