One of the top mistakes investors make when allocating capital (toward Chinese assets or any other asset class, for that matter) is lumping all assets of an asset class in the same category. Or assuming that just because an asset class is doing well, every asset you touch will turn to gold just because it’s in the asset class in question.
Before continuing, it is only fair to make it clear that there is no consensus among economists with respect to the “investment vs. speculation” debate. Some thinkers believe the two terms are interchangeable despite the worse “rap” speculation tends to get. Others believe that speculation revolves around chasing a quick/easy buck, whereas investing revolves around having the bigger picture and sustainability in mind.
For the sake of our discussion, we will be closer to the latter side of the debate. Here at ChinaFund.com, we believe in putting together strategies with the bigger picture in mind and, at the same time, with sustainability in the spotlight. Our team has been involved in China over the past 12 years, let’s just say we are anything but a fly-by-night operation. As such, we believe in finding meaningful long-term investment opportunities and nurturing long-term partnerships with clients rather than embarking in a “whatever it takes” short-term speculation journey.
With that in mind, it is worth noting that both dimensions are well-represented in China.
In other words, there are more than enough investment opportunities with staying power to choose from. While many of those might not be something “shiny” enough to be perceived as “hot” by the average investor, there is tremendous wisdom behind the idea that many of your best investing choices will be “boring” ones.
On the other end of the spectrum, short-term “fad” investment opportunities abound. To put it differently, assets with weak (sometimes to the point of non-existent) fundamentals but with high enough returns to build many fortunes for savvy and/or lucky (depending on your perspective) speculators. Think of them as large-scale games of musical chairs. While the music is running, all participants are enjoying themselves and greedily counting their paper (unrealized) gains. A lot of them are well aware of the fact that they are being fools for buying assets with weak fundamentals but are convinced they will find more than enough fools down the road to buy those assets from them at a hefty profit.
Eventually, however, the music stops.
In a game of musical chairs, the one(s) who haven’t been able to catch a seat quickly enough lose and the same principle applies to speculation, as we have chosen to refer to it for the purpose of this article. Those who have realized their gains and cashed out before the music stopped are laughing all the way to the bank, whereas others are left holding the proverbial bag.
This principle is even valid for nations with multi-decade or multi-century track records of prosperity. When it comes to less established investment landscapes such as what we have in China, it’s even more so important to understand that yes, you can generate impressively high returns but at the same time, that you have to take on a higher degree of risk than in more established (from a financial perspective) jurisdictions.
Which path you choose to pursue is entirely up to you.
As far as the ChinaFund.com team is concerned, our position is crystal-clear: the optimal approach is investing in China knowing that you are grabbing a piece of a secular bull trend. If you are wise and thorough enough, you can build a portfolio that will stand the test of time and generate career-defining profits.
Under such circumstances, why pick up pennies in front of a steamroller? In other words, why pursue reckless speculation which could endanger your entire “career” as an investor when you have a generational opportunity in front of you? By chasing after a proverbial quick buck and adopting a strategy which revolves around just that, you are potentially missing out on game-changing long-term opportunities and that would be a shame.
No matter which side of the fence you are on regarding this topic, we would strongly encourage you to contact the ChinaFund.com team for, at the very least, a preliminary consulting session. Run your strategy or strategies by us, pick our brains and let a company that has been active in this jurisdiction for over 12 years help you navigate the frequently muddy waters of the Chinese investment/speculation landscape.