Why we still invest in what people actually need

He is arguably best known for his “hierarchy of needs”. This is a theory of motivation which proposes that we are driven to satisfy our most basic requirements before moving on to ever more complex goals.

Although Maslow himself never represented it visually, the hierarchy is nowadays routinely depicted as a pyramid. The base is comprised of physiological needs, such as food and water, while the highest level consists of “self-actualising” needs, such as creativity and spontaneity.

You may already be aware of all this, of course, since Maslow’s work has not escaped the attention of the investment community. There even exists a school of thought known as Maslowian portfolio theory, which aims to ascribe investment objectives to each of the hierarchy’s layers.

I perhaps ought to make clear at this point that I am by no means some kind of slavish follower of the Maslowian approach. But I do sometimes wonder whether, on the whole, the sphere of investing has rather lost sight of what people actually need.

In light of that possibility, ask yourself this: have you felt just lately that artificial intelligence is, as they say, the only game in town? You could surely be forgiven for inferring as much if indexes and headlines are any sort of guide.

Consider, for instance, the Magnificent Seven’s long-established dominance of the S&P 500. Between them, these household-name technology giants account for roughly a third of the index’s overall weighting.

In Asia, where our fund invests, AI casts an even longer shadow over some markets. Nowhere is this more apparent than in Taiwan, where TSMC, the world’s largest chip manufacturer, is responsible for around 45% of the Taiex index.

There is no doubt that semiconductors and other components of the AI build-out are greatly needed. This goes a long way towards explaining why we normally have approximately 20% of our holdings in tech stocks.

Yet all those other needs – the myriad necessities, exigencies and desires that Maslow sought to categorise – remain to be met. Not least from the perspective of sensible portfolio diversification, it may be useful to bear this in mind.

Below are four Asian smaller companies that we regard as capable of offering balance to portfolios in an era increasingly defined by the rise of AI. They are presented for illustrative purposes rather than as investment recommendations.

Companies selected for illustrative purposes only to demonstrate the investment management style described herein and not as an investment recommendation or indication of future performance.

Important information

• Past performance is not a guide to future results.
• Investment in the Company may not be appropriate for investors who plan to withdraw their money within 5 years
• The Company may borrow to finance further investment (gearing). The use of gearing is likely to lead to volatility in the Net Asset Value (NAV) meaning that any movement in the value of the company’s assets will result in a magnified movement in the NAV.
• The Company may accumulate investment positions which represent more than normal trading volumes which may make it difficult to realise investments and may lead to volatility in the market price of the Company’s shares.
• The Company may charge expenses to capital which may erode the capital value of the investment.
• The Company invests in smaller companies which are likely to carry a higher degree of risk than larger companies.
• Movements in exchange rates will impact on both the level of income received and the capital value of your investment.
• The Company invests in smaller companies which are likely to carry a higher degree of risk than larger companies.
• There is no guarantee that the market price of the Company’s shares will fully reflect their underlying Net Asset Value.
• As with all stock exchange investments the value of the Company’s shares purchased will immediately fall by the difference between the buying and selling prices, the bid-offer spread. If trading volumes fall, the bid-offer spread can widen.
• The Company invests in emerging markets which tend to be more volatile than mature markets and the value of your investment could move sharply up or down.
• Investment companies which specialise in small markets or sectors of industry are likely to be more volatile than those with more diversified portfolios.
• Yields are estimated figures and may fluctuate, there are no guarantees that future dividends will match or exceed historic dividends and certain investors may be subject to further tax on dividends.

Other important information:

The details contained here are for information purposes only and should not be considered as an offer, investment recommendation, or solicitation to deal in any investments or funds and does not constitute investment research, investment recommendation or investment advice in any jurisdiction.

The Aberdeen Asia Focus PLC Key Information Document can be obtained here.

Issued by abrdn Fund Managers Limited, registered in England and Wales (740118) at 280 Bishopsgate, London EC2M 4AG. The company is authorised and regulated by the Financial Conduct Authority in the UK.