A lot of focus is usually placed on the largest and most established economies while ignoring lesser known ones. While it is safer to invest in stable and developed economies, several emerging markets are good investment options. Because these emerging markets are still ‘young’, their growth rats are significantly higher and thus offer huge potential returns. Besides, it doesn’t hurt to diversify your portfolio.
In this post, we’re going to look at some of the best emerging markets to invest in and how to do it. So far, there have been four outstanding emerging markets – Brazil, Russia, India and China. Combined, these 4 countries’ economies have been labelled BRIC countries, and here is why you should invest in them.
Now the seventh largest economy worldwide, Brazil is among the top emerging markets to invest in. The country has a lot of natural resources including the largest offshore oil reserves. Furthermore, Brazil produces copious amounts of iron ore and ethanol enough to contribute billions of dollars in revenue. Besides the resources, Brazil is also home to numerous industries and has an active stock market. In fact, the Bovespa Index shows that the country’s stocks are at an all-time high. This year, increasing commodity prices especially in oil will likely improve the country’s economy, making it a good investment option.
To invest in Brazil, you have two options. The simplest one is through exchange traded funds (ETFs) that own stocks in Brazil. The most popular ETF listed on the NYSE is the iShares MSCI Brazil ETF, and it has been steadily rising since 2016 as the economy grew. Otherwise, you can also directly invest in the stocks through a broker or by opening a foreign investment account. The problem is that this may incur a lot of extra costs that may discourage you.
Of late, Russia has been on the news for the wrong reasons, especially about hacking and their athletes engaging in doping. Even though Russia’s economy had somewhat stagnated in 2017, it is expected to recover this year. Goldman Sachs predicted that the GDP of Russia would rise to 3.3% in 2018, and the minister aims to achieve 3% if certain measures are implemented. To invest in Russia, you can once again open a foreign trading account or do it through your broker, but it would still incur additional fees. The most popular ETF, though, is the iShares MSCI Russia ETF.
Recently, India overtook China as the fastest growing among emerging markets as it recorded a 7.1% GDP growth rate in 2017. The growth could have been much higher had it not been for the demonetization of 500 and 1,000 rupee notes in the last quarter of the year. This year, the GDP growth is expected to drop to 6.5%, but the overall economy is still very lucrative. To invest in India, the iShares MSCI Index Fund ETF is the smartest option as it is listed on the NYSE.
Of course, we could not conclude a piece on emerging markets without mentioning China. The economy is growing so fast in various sectors that it is expected to outdo even the US economy. The only problem with investing in China, though, is the political instability. Despite this, the iShares MSCI China ETF has still been on the rise for the past two years and is expected to keep doing so in the years to come.