BRICs are out, welcome FANG

in the early years of the current millennium, Goldman Sachs came out with a report featuring four countries (Brazil, Russia, India and China – collectively known as BRIC nations) with huge population. As per the report, these countries were to drive the growth of the world economy and by 2050, China and India were slated to become two of the three largest economies in the world along with USA.

This report drew a lot of interest from various investors in stocks of companies in these countries. Large sums of money from various international investors entered these markets.

People started searching for countries similar to these four and the acronym started becoming bigger with the entry of South Africa and Indonesia in the club. Now BRIC was replaced by BRIICS.

Now, a story that was to be true for next 50 years, became unattractive in a little over 10 years and now very few talk about BRIC countries as a group.

I recently came across an article titled “BRIC is out and FANG is in”. Now what is FANG? This acronym stands for a group of four companies. This time it’s companies and not countries – does it mean “this time it’s different”? Well, time will tell.

Which are these companies? FANG stands for Facebook, Amazon, Netflix and Google. What is the future of these companies? What is the future of investments in the stocks of these companies? Well, the answer to both these questions is the same, “I don’t know”.

However, I would only like to caution everyone to avoid investing based on themes. Such themes often become fads and the components may also change.

Taking shortcuts while selecting your investments is a BAD idea. Be careful of the fads.

#RidingTheRollerCoaster – 200

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Samudra manthan – Excessive turbulence

Think of all market turbulence as “Samudra manthan”. In the mythological story of samurai manthan, so many things came out, including poison and nectar. The market turbulence is no different. Every market turbulence brings out some poison and some nectar.

The poison kills many investors’ portfolios and reputations of some experts. On the other hand, we have seen in some episodes how the turbulence brought out the best. Some examples of the nectar are:

  • Birth of Securities Exchange Commission, Federal Deposit Insurance Corporation and Federal Reserve bank after the great depression
  • Beautiful tulip gardens of Amsterdam
  • Birth of SEBI, NSDL, NSE after the great Indian securities scam. Innovations like screen based trading, dematerialisation of securities, rolling settlement, etc.
  • Birth of companies like Amazon, Google, etc. in the DotCom boom

Such churning of the ocean is required to bring out the nectar.