What do you do if you are a younger investor looking for opportunity for some serious growth and can handle more than average risk? In my opinion I would look to emerging markets now as they have been hit hard be recent economic conditions and the overall environment in emerging countries. I am a firm believer in ETF and I recommend investing in equities in emerging markets through the use of ETF’s to achieve this goal. When you think of emerging markets you tend to think of China, India and Brazil as the leaders in foreign investments. Over the past three years the iShares S&P India has lost almost 9% annualized. In comparison if you had invested in an S&P 500 Indexed ETF you would be over 60% for the same three years. As Warren Buffett says the time to buy is when people are in a panic and over the last several years investors have been in a panic in emerging markets. So if you have some extra money you can take some added risk with now may be the opportunity to look at the emerging markets for some possible serious gains.
As I said the main three emerging markets that have been looked at in the past are China, India and Brazil but other countries that deserve a look are Mexico, Indonesia, Malaysia, Chile, Peru and too many others to list. The key is to know the strengths and weaknesses of each country you are thinking of investing in, the political climate in each and how stable are its trading partnerships. You need to be aware of the social climate as well as the political one for each. That is key to success in investing in emerging markets. So after you find a country or maybe a few that you will want to invest in then you will need to find an appropriate tool in which to invest. I recommend ETF’s for a few reasons with the tope few being they are inexpensive mechanisms that will give you good diversification without having to own a lot of individual stocks. I am not saying do not look at mutual funds because there are several good ones that exist and in many of those you may get an added diversification benefit of the fund owning bonds in the local country.
Regardless of what country you decide you want to invest in remember to always stay informed on the news and conditions in the country you decide to invest in. While things in the US may not be ideal currently you have to admit for the most part things are stable, not desirable, but stable in comparison to emerging countries. If you look at most emerging markets the majority of them have younger work forces that will be able to help support more growth. Most also have lower debt to GDP as compared to the US as well and in the case of China its debt is 23% of GDP compared to the US at 102%. And a third reason is China, India, Indonesia and Brazil are four of the top five countries in terms of population accounting for almost half of the world’s population.
As you can see from this basic evaluation of emerging markets many countries outside the US have plenty of room to grow and expand. If you are younger or able to handle some extreme risk in your portfolio do look at emerging markets and make them part of your investment strategy. But always remember when you invest in an emerging market you must stay informed and keep an eye on the stability of the country in which you have invested. Things can change in a hurry and in many instance in ways we do not expect. In my retirement account I allocate at least 15% and up to 30% in the international choice. If you do not feel comfortable in investing in a single country there are ETF’s and mutual funds for regions of the world as well so look to those as well. Regardless you need to be buying as it seems the rest of the world is in a panic.
