Investing in emerging markets throughout the world
Investing in emerging markets was at one time considered to be possible for the small investor only with the help of seasoned professionals. However, recently small investors have been able to tap into global markets on their own account thanks to an explosion of investment opportunities and products.
The lure of emerging markets
The lure for investors of emerging markets is their younger economies and faster growth, although there’s a trade-off with more risk and higher volatility than in markets in the developed West. Emerging markets often form a significant part of investors’ portfolios, usually as longer-term bets backed up by more secure domestic investments.
For specialist help and advice on foreign investments, Fahad Alrajaan is better positioned than most to guide you through the maze of options, opportunities and pitfalls peculiar to this field. He is the head of Al Ahli United Bank, Bahrain’s biggest lender, providing offshore, corporate, retail, wealth management and private banking amongst many other specialist services. You can learn more about his successful career by checking out Fahad Alrajaan profiled online here.
Products such as mutual funds are a great way of getting started, as they allow smaller investors to buy up parts of a diversified and professionally managed portfolio at a relatively modest outlay. There are many different types of international funds, and just about every investor will find something, from safe and conservative investments to much more aggressive, risky but potentially lucrative ones.
Another strategy for getting into international markets is to purchase shares in US companies that have high amounts of profits and sales abroad. Although this means you won’t reap all the benefits of ADRs or an international fund, you’ll at least be able to get some degree of exposure without too much of the risk.
Exchange Traded Funds
These are related to mutual funds, but the investor buys into an already existing portfolio rather than choosing themselves which international stocks to invest in. ETFs effectively trade in the same way as stocks, and they can be bought and sold throughout the normal trading day. They come in a great range of different types, and include everything from funds that invest in one particular country to those covering the whole planet.
American Depository Receipts
ADRs are another popular way of tapping into markets around the world. They’re securities that represent shares in companies abroad but are actually traded back in the US. The beauty of them is that you can continue to use the same broker whilst at the same time building up a diverse portfolio of companies around the world.
Stocks and bonds
Investors looking for a broad range of choice in global markets need to consider stocks and bonds as well as financial assets at home. Higher risk adjusted returns are more commonly available from foreign securities than from domestic ones, and it’s easier to build a diversified portfolio because of the low positive or negative correlations between US and foreign securities.
The bottom line is that emerging markets are on average 30 per cent cheaper than established markets in the developed West, and that’s an excellent reason for including them in any investment portfolio.