Want to add a little spice to your portfolio? Have an appetite for risk which could deliver significant returns? Look to emerging markets.
Countries with low, middle, and upper-middle incomes per capita, relative to incomes in other countries around the globe, are classed as developing, or emerging. These economies may be starting from a lower base than developed countries such as the US, UK, Germany or France, but they are growing at a much faster rate.
Unlike developed countries, which are struggling to support an ageing population, emerging markets have younger, growing, populations. According to the CIA, the average age in the UK is 40.5 years, where in India it is 27.9 years. These demographics are supportive of economic growth, and the companies that leverage this trend.
Emerging markets have fast growing middle classes; thanks to urbanisation, technological advancements and a greater ratio of working population to dependents. These growing middle classes impact consumption, driving demand for aspirational items such as white goods, cars, holidays, cigarettes and alcohol – creating significant investment opportunities.
Increasingly, emerging market stocks are not just emulating the success of their developed market peers – but surpassing them. This is particular evident in the tech sector, where Chinese companies Tencent and Alibaba dwarf the revenues and earnings of the US tech giants. India is world leading in fintech, while Korea has long been a leader in tech hardware.
It is not just equities that emerging markets offer either. Bond yields in emerging markets are almost without exception significantly higher than those in developed markets. Risk is rewarded, with real returns not see in the UK and US in years.
All this week, we are focusing on emerging markets, sharing their potential pitfalls – and where you can make a pretty penny.
Monday: An Introduction
What is an emerging market? What is a frontier market? Who are the best investors?
Star Emerging Markets Investor Mark Mobius vs a Tracker Fund
4 Top Rated Passive Emerging Market Funds
Tuesday: Emerging Europe
Russia, Eastern Europe and navigating the politics for profit
World Cup Boost to be Shortlived for Russia
Booming Romania Set for Upgrade to Emerging Market
Why it Pays to Go Active When Investing in Russia
Banks to Profit from Growing Emerging Europe Wealth
Wednesday: The Americas
Latin America – more than just oil
Mexico: Trade, Politics and Profit
Investors Positive on Argentina Despite Political Climate
Antofagasta's ESG and Profitability Outlook Improves
Latin America Offers Opportunities to Bond Investors
BlackRock: Latin America Will Rally 20%
Thursday: Middle East and Africa
Where are the greatest opportunities in this fast-growing continent
5 Top Performing Middle East and Africa Funds
Ashmore Looks to Africa for Equity Gains
South Africa: Politics Look Positive But Risks Remain
Should Bond Investors Be Worried About South Africa?
Mark Mobius: We Will Be Investing in Iran in 10 Years
Friday: China and Asia
A guide to the world’s largest economy
Trump Hits China Innovation with $50bn Trade Tariff
Is Emerging Market Debt Still Attractive?
What Does Trump-Kim Summit Mean for Asia?
Profiting from China's Growing Middle Class