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Should You Invest In Emerging Markets

Jul 9, 2008
As a stock market investor you should look to invest where you can get better returns. With the stock markets being the first and foremost vehicle to get better returns on your money which is invested make sure that you look all around the world for investment.

First of all let me describe what emerging economies are and which countries are considered to be emerging from the economic development perspective.
America and most of the Europe is considered to be developed and the markets are generally saturated. That translates into say as a company selling products the growth in demand is only about 3% to 4 % on an annual basis.

In the emerging markets the growth is coming from the demand because the country is till developing. There are new roads and facilities being built. The lifestyle of people is changing and hence increased demand of lifestyle products. For that new factories are being built and there is demand for cement, steel and other materials. This means that overall growth in demand on a year on year basis is much better than 3% to 4%. Most of these emerging economies have growth rate of 10% to 15%.

Some of the emerging economies are India, Brazil, China and Russia. Then there are others like Argentina, Vietnam and a lot of South American countries. In fact the first four I mentioned are known as BRIC economies a termed coined by a Goldman Sachs report on emerging economies.

The stock markets of all these economies are doing very well as all the listed companies are growing fast and hence there stock prices are rising. Seeing that, a lot of companies from the US are investing in stock markets in emerging economies. This again is leading to huge price increases leading to a windfall of profits for investors.

As you try to explore your options for investing in the stock markets abroad you have two options. One is to try and invest in these markets by yourself. There are a lot of ways to do that should you do your research. The other way is to invest in ADR of these companies listed in the NYSE.

The best possible option that you have is to invest in emerging market mutual funds of a various mutual fund companies. This is the best route as you can gain exposure to international market without the actual hassle of going through investing directly in the stock market of the emerging nation.
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The author has stock market for beginners lessons as help. He has a resource on stock market for beginners investors for new investors
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