Jim O’Neill’s mantra to beat the market over the next decade

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Jim O’Neill’s mantra to beat the market over the next decade


MUMBAI: Lord Jim O’Neill, famous for coining the term BRIC during his stint with Goldman Sachs, is a thinking man’s investor. O’Neill’s ideas and researches have helped bring the opportunities that lay beyond the humdrum of developed markets for global investors through his extensive work on emerging markets.

In keeping with his rich insights on emerging markets, the current chair of the UK’s influential Chatham House said the current macro-economic backdrop is ‘scarily positive’ for emerging markets, and that he expects India and China to remain the ongoing economic miracles of the 21st Century, as their influence on global economic growth continues to rise.

But besides the wisdom on emerging markets, the former Treasury Secretary of the UK dished out some genuine lessons on investing in his interaction at the three-day
ETMarkets Global Summit 2021 today.

At a time when global and domestic equity indices are scorching their way to record highs with no concerns around valuations, O’Neill asserted that valuations still matter in investing. “I am a strong believer that you can never ignore valuations; ultimately they are the lynchpin of the markets. The more expensive markets become, the more careful one should be,” O’Neill said.

He said expensive markets have gone on to become more expensive, but then one day they will no longer be that way. “I have seen this that when the market turns a trend, it is the most expensive assets that suffer the most,” O’Neill said.

For O’Neill, being a successful investor is all about possessing the craft of being able to spot inflection points in the market, those nifty turns from where fortunes can change for the better or worse in the world of investment.

Jim was credited with almost prophetically spotting the high economic growth cycle that emerging markets like India, China, Brazil and Russia were entering right after the ‘9/11’ crisis in 2001. “Investors that can act quickly at true points of inflection are typically the ones that perform best over the long-term,” he said.

O’Neil, who invests actively in early-stage companies himself, also said if he were younger anymore, he would have started a fund called passive plus, that retained the characteristics of normal passive investing but gave him the freedom to act quickly at true points of inflection in financial markets.

A real life example of that lesson was visible in the global financial markets in March at the height of the Covid-19 panic, when most investors sold their equity holdings in fears for their health, asset value and life in general, while some fund managers realised that markets will be backstopped by the US Federal Reserve and that asset prices will bounceback violently.

O’Neill firmly believes that such a passive strategy with the added ability to buy or sell assets during trend changes in the market will determine the best investment returns over the next decade.





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