KEY POINTS:
When I think of making an investment, I give it the "Aston Test". Aston is my 1-year-old grandson and the "Aston Test" is whether, in 20 years with the benefit of hindsight and the arrogance of youth, he will think the investments I make this year are clever or stupid.
I am a long-term investor and the thing I like about investment is hunting out the big stories. The big stories are the major trends that are happening - things changing the world and the way that we live.
The "Aston Test" forces me to test my thinking on whether I have got the right big stories and worked out how to invest in them.
One of the big stories I have been watching and playing for the past five years or so is the resurgence of Asia, and in particular China.
I think this may well be the most important story of the 21st century - China, dormant for some centuries, has awoken and started to stir.
It now has a booming economy, which has been expanding at about 10 per cent a year.
When I look at what is happening there, I cannot see its growth stopping any time soon.
There will be ups and downs, but the long-term trend will be upwards - and investors should always make the trend their friend.
When I look at a story such as this, I think there must be a way of playing this situation to make good investments - and there is.
This is not a situation in which I think people should hop on a plane and go and try to hunt down the right shares or property - there are too many barriers such as language and the legal and tax environment.
Instead, this is a situation in which managed funds are best.
There are quite a lot of managed funds based on emerging markets generally, and Asia in particular.
As you would expect, some have given quite spectacular returns. For example, Platinum Asset Management Ltd, an Australian fund manager, has produced returns of 21.6 per cent per annum over the past five years in spite of this year's downturn.
Asian investments will be volatile - this is not somewhere to invest money you are going to need soon.
You will need a strong stomach to tolerate the ups and downs, but if you stay with it over the long term you are bound to do well.
Another way to benefit from the Asia/China story is to invest in the big mining companies such as BHP and Rio Tinto. They have benefited from the boom in commodities created by Asian growth.
When it comes to investment, New Zealanders can be quite myopic - we are more likely to see the investment universe as that which is right under our noses rather than lift our heads and look out at the wider world.
This is a great shame - to restrict yourself to investments only in New Zealand is to confine yourself and miss out on some of the big trends that are happening.
I have this fear of a conversation with Aston:
Aston: "Granddad Martin, you were around in the early 2000s when China was booming. You must have made a lot of money."
Granddad Martin: "Well, no Aston. We had all our money in Cricklewood real estate and when that did not work we invested with Ace Finance."
Think long term and invest in the big stories.
Each week best-selling financial author Martin Hawes shares his strategies to help you grow your wealth. You can email your burning questions to info@wealthcoaches.net or andrea.milner@heraldonsunday.co.nz On the web: www.wealthcoaches.net
