Saturday, June 5, 2010

Invest in Emerging Markets

Wall Street continues to gyrate wildly as it grapples with a litany of problems. These problems include the Euro and European debt, the BP oil spill, continued weakness in US employment and disasters still hiding inside US financial institutions.

However, there is one thing which never ceases to amaze me about the behavior of both individual and institutional investors in the United States during these times of stock market volatility.....

And that is, that at any sign of trouble in the stock market the first stocks that are jettisoned are those located in the emerging markets. Emerging markets have felt the most pain in the recent sell-off.

Investing in "emerging markets" sounds risky, but I wonder how risky it really is and compared with what.

The United States, for instance, is hardly a safe haven anymore. The line that separates the United States from the emerging markets may be less than most investors suppose.

The bottom line is that American investors seem to be holding views about emerging markets which are simply outdated.....

First of all, unlike the United States and Europe, most major emerging markets like China are not burdened by debt. In fact, they have surpluses.

Secondly, these emerging economies continue to grow very rapidly. The IMF (International Monetary Fund) sees the emerging economies growing at an average of 6.3 per cent this year, led by China and India. Europe and the US are growing...barely.

Some investors are aware of the term BRIC, which stands for the countries of Brazil, Russia, India and China. The BRIC economies are already larger than the developed economies of Europe.

But what is really surprising is that the other emerging economies - the smaller non-BRIC countries - are now larger than the United States economy!

Investing in emerging economies, like China, now is like investing into the United States about a century ago.....

About that time, the US was considered to be an "emerging market" (although that term did not exist then) and a very dangerous place for those "smart" European investors to put their money.

So most European investors stayed out of the US. We all know how well that turned out!

Yes, there will be lots of ups and downs in all of the emerging markets. But my advice is stay the course and dollar-cost average into emerging market investments. It is a once-in-a-generation opportunity, much like the United States was a century ago.


  1. Thanks for sharing this helpful info!
    I always like to read your blog..

  2. Definitely its a Great Opportunity as India and China rocks with a growth rate of 6% consistently.