Emerging Markets
Invest into the future: High returns, high risks
The term "emerging markets" is commonly used to describe business and market activity in industrializing or emerging regions of the world. These countries are developing and have therefore a high economic growth rate. For stock investors, emerging markets stood for very high profits in the last few years. Several stock indices doubled or tripled in the last 5 years!
The following countries are included in the Morgan Stanley Emerging Markets Index: Argentina, Brazil, Chile, China, Colombia, Czech Republic, Egypt, Hungary, India, Indonesia, Israel, Jordan, Malaysia, Mexico, Morocco, Pakistan, Peru, Philippines, Poland, Russia, South Africa, South Korea, Taiwan, Thailand, Turkey.
The 4 top emerging markets: Brazil, Russia, India, China (BRIC)
The most famous emerging market countries are Brazil, Russia, India and China - also known as the BRIC countries. (Sometimes Mexico is added to the list, making it the BRIMC countries.) These mayor economies are growing and developing at at high rate.
Especially India and China are seen to be taking over the economic lead in the world by 2050. According to economic experts, India is projected to join China in surpassing the size of the U.S. economy by 2050 (see article in the International Herald Tribune).
Should I still invest in emerging markets or is it too late?
Of course it would have been nice to have started investing into these promising markets a few years ago and already haul in huge profits today. However, we still think that is worthwhile investing into emerging markets, simply because these economies have a much higher growth rate than the industrialized regions such North America and Western Europe.
Such emerging market investments should also be seen as a hedge for the future. If you are living in a industrialized country (e.g. USA, EU), it is possible that the increasing competition from emerging countries puts pressure on the industry or region you are working in, resulting in lower margins and maybe also lower salaries in the future. To hedge this risk, you should invest into other regions of the world, especially into emerging markets.
If you think it is to late to invest into the "classical" emerging markets (such as BRIC), have a look at our Frontier Markets section - the emerging markets of the future!
How to invest in emerging markets
We have already pointed out the advantages of Exchange Traded Funds in our ETFs section. If you are planning an investment into emerging markets, you should seriously consider doing so via an ETF. Theses funds combine a broad diversification to reduce risks with low fees to boost your profits.
Several ETF vendors offer products on the MSCI Emerging Markets Index.