An Investment Frame of Mind – For Five Years Out

Wednesday, January 6, 2010

Time Rocket - FutureContinuing on with what I believe to be the frame of mind needed for this economy and market environment, let’s focus on five years out. This is a good time period for thinking about investing. It’s long enough to get beyond current uncertainties and volatility, but not so long as to be unfathomable.

When thinking five years out, do so in a “quiet” environment. Not necessarily silent, but away from possible interruptions – people, phone, email and even physical reminders of work that needs to be done. Also, clear your mind of present day concerns and, especially, past investing mistakes or losses. You want to move into the future unburdened.

So, where to start? First off, remove any idea constraints. Research and development in the US produces amazing advances, so don’t think of the current and near term “product mix” as the basis of future growth. Today’s exciting products will later be viewed as standard stuff, and growth, as always, will build off of that foundation.

To spur your thinking, go beyond the financial media. They tend to focus on the present and near future. Instead, look to publications that deal with product advances. Check out science, technology, health and environmental articles for recent discoveries and work that is in development. Here are two examples:

“Merging Man and Machine – The Bionic Age; A Better Life with Bionics” (National Geographic, January 2010, page 34). This subheading says it all:

The blind can see; a one-armed woman can fold her shirts.

The article also explains the technology that allows a young, deaf boy to now hear.

“Space, Inc. – The New Space Race” (Popular Science, January 2010, page 34). Another explanatory subheading:

Who needs NASA? This year the civilian space industry finally takes off.

The article has a list of many firms vying to fly goods and people into space.

Science fiction based on early research and theories can be a precursor of things to come. For example, in the 2002 movie, Minority Report, Steven Spielberg included many items from such work.

After researching and thinking about the future five years out, you can better appraise a company’s current products and strategies – or a fund manager’s investment approach. Most importantly, you will have the right frame of mind for viewing long-term investment potential.

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January 2010