How to Invest in the Emerging Markets

In the 80s and the 90s the prosperity of the usual markets (USA, western Europe and Japan) have suited investors needs of a low risk high return investments however this did not last too long and day by day those investors were facing major economical problems that resulted in major losses and investing in these usual markets became some times more of a gamble than an investment. Mean while some third world countries were having major economical improvements and investors in these new emerging markets were the first to get on the train of profits resulting from the new economical nature of these emerging markets.

Many investors nowadays chose to get involved in these markets in order to minimize their risk and diversify their investments while others found them to be a virgin gold mine that waits to be dug for the insane returns that one could acquire on his investments. However certain problems keep facing new investors entering these markets.

The main players in the emerging markets are Brazil, Russia, India, and China or BRICs as investors call them. These countries with their economic and political reforms have created a growth that cannot be matched by the rest of the developed world which creates a strategic opportunity for investors who want to make money on long positions even with the economic crisis that currently cripples developed economies.

As an investor who would like to get involved in the emerging markets you will have one of three choices of assets that you could trade for profit:

1-Investing in properties: although it’s known to have a very high return, it is extremely risky and usually it is hard to examine or evaluate (or even visit) your newly purchased property not to mention that it involves huge risks due to the many factors that control property prices as well as the usual requirement for a relatively big capital. However this was never a option for myself as I had limited funds and wouldn’t want to risk them all in one risky investment that would cost hundreds of thousands with no clear exist strategy.

2-investing in local stocks: many investors have made fortunes on foreign stocks however this method is only recommended for those who do have knowledge in the nature of the stock markets in the targeted emerging market and access to news, resources and analytics related on those emerging markets stocks.

3-investing in currency: the currency of a country projects the economy of that country and with the appearance of leveraged currency trading (forex) I can’t think of a better way of investing in the emerging markets. This way I could have an instrument that doesn’t require any significant capital, limited risk on long term positions, huge resources regarding the instruments and my nice leveraged profit.

4-investing in ETF: ETFs (exchange traded fund) on the emerging markets are amazing instruments due to their flexibility, low cost, tax efficiency (in the USA) and their limited risk. Emerging markets ETFs are a package of many financial assets like stocks and bonds and trades at approximately the same price as the net asset value of its underlying assets over the course of the trading day. What I personally find very useful when it comes to trading ETFs is that they behave very similarly to stocks and we can defiantly say that they are the easiest to trade of all the four options.

The emerging markets are a great new place to adventure with and I believe we haven’t witnessed anything but the beginning of these markets financial glory.