Are you invested in emerging markets? Are you concerned about your investments in emerging markets? These are two paramount questions everyone needs to ask themselves and then provide an adequate answer. For those who are invested in emerging markets, the last five years have been a nightmare for you and the investment in most cases. Over the last five years, the MSCI Emerging Markets index has shrunk about 25%, and that is just since last April of 2015. Not a good case to invest in these types of markets in general.
The primary cause of this decrease in the emerging markets is due to China. China makes up about a quarter of the MSCI index and thereby the index lives and dies according to China’s performance. While China did show some signs of life when it soared in the early part of 2015 since April, it has decreased about 33% thus showing that China may not be growing as the government suggests. As the Chinese government handles releasing this information, it can easily manipulate the data and make China appear better off than it is. Such is a risk of investing in Chinese stocks or emerging markets in general.
But looking past just China many people think the remainder of the emerging markets has yet to bottom out. Though there is still a lot of uncertainty in emerging markets the prices are indeed attractive for many investors. This is especially the case for younger investors who can afford more risk and have the time for the markets to work in their favor. I see this as a buying opportunity for many who can look at the long-term ownership of emerging market equities as being down about an annual negative 2.3% is an excellent opportunity to buy in my opinion.
While with each passing year of dismal returns it does become harder to advocate for the purchase of emerging markets I think it is merely providing an excellent buying opportunity. That is provided you can weather the ups and downs and think long term in nature. As emerging market’s economies tend to grow faster than established ones it is only a matter of time before these markets make a comeback and revert to a positive growth. According to many analysts, the economies of these emerging markets are better off than they were during the recession for 2007 and 2008.
While not perfect emerging markets can provide some diversification to a portfolio and at the current prices they are an excellent opportunity for substantial growth when they do make a recovery. I personally like Vanguard’s Emerging Markets exchange traded fund symbol VWO for a safe and stable choice. Though it is also down it is not down the near 25% that the MSCI Emerging Market index is over the same period.
If you have any questions or have any concerns, please feel free to contact me.
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