Best Sector for Long-term Investment

Long-term investment may mean different thing for different people, but for me and for the purpose of this article, let’s say we are looking at an investment horizon of 8-10 years.

If I ask you to make an investment for this long a period, i.e., invest and forget, and then I ask you to pick up just one sector to bet all your money on stocks in that sector which sector would that be?

There is no straight answer but with logical reasoning and some analysis we can make a reasonable prediction and for me that best sector would be Healthcare.

Below are five reasons why this sector offers an excellent long-term investment opportunity for you.

1. Huge technological advancements

Over the past few years there have been huge technological advancements in the area of drug research. This has led to better drugs coming out that are also cost effective. There are more and more clinical studies being undertaken, with rising research budgets. Over the next few years we can expect many drug approvals especially from the Indian players.

2. High growth rate

The Investment Commission of India came out with some numbers on the state of healthcare industry. The market size of hospitals and nursing homes will grow at 20% every year. Medical equipment will grow at 15%; clinical lab diagnostics are growing at 30%. Another booming business is imaging diagnostics which currently stands at Rs.4,500 crore, representing a 30% growth.

3. Life factors

This is what I call as life factors – increase in life expectancy, higher income and growing middle class population, higher reach for health insurance, and increasing lifestyle diseases. All this points towards the growth of healthcare sector.

4. Investment in healthcare infrastructure

2012 notices a slowdown in investments in healthcare sector. However, as the demand rises in Tier II and Tier III cities, there will be plenty of investments to improve the infrastructure, such as increasing bed capacity, medical tech, and diagnostics. We can expect many foreign companies investing in Indian healthcare.

5. Wider reach of insurance

Health insurance is a Rs. 15,000 crore business and is expected to grow at a 20% p.a. rate for the next 10 years or so. It’s expected to grow at a rate even faster than healthcare.

So, what do you thing about healthcare industry in India. Which stocks are you holding and what’s your expectation from them? Do share your opinion.