Yeah, that's what I thought as well. The risks are high if you're doing it yourself so I should look for some companies that are investing part of their money in such markets. Do you have any suggestions about what investment funds should I use to achieve this?
The returns in these developing markets can be really high. Not only in the equities market, but in their bonds especially. I'm talking about bonds which will pay you 17 or 18% annually. They pay more to borrow, because your risk is higher than when investing in the U.S. or Germany for example. Good places to invest are Thailand, Nigeria, Turkey, the Philippines, and Ghana. Do your home work first. You'll be surprised that these places aren't so bad for making money.
haha, yeah, bonds sound great. Ask all those guys who were involved with bonds from Argentina. There is a reason they have to pay 18%, because there is risk of default. I would definitely stay away from bonds from any country, like Argentina that is not on friendly terms with the USA because your legal rights might be limited. I believe it is up to about 15 years for those bondholders for Argentina, and still it isn´t a done deal.
So if one wanted to invest in such a country, you'd have to be tactical, shrewd and extremely wise...right?...i think the best time to invest would be when no political exercises are taking place...then again surety of the same isn't given ...everything is a risk!
South Korea isn't a 3rd world country, it is a 1st world country, 20 years ago it was a 3rd world country. Worst case example of what can happen in a 3rd world country is the Bre-X scam which happened in Indonesia. Lots of big fish got sucked into that one including western financial institutions. The Indonesia government was on that one, and the investors got scammed out of $6 billion.
From a real world perspective, South Korea is a 1st world country. But from an investment categorization perspective, it's still an emerging market. So if you were buying an MSCI Emerging Market Fund or an ETF you would still get a portion of South Korea (which basically means you get a big chunk of Samsung).
I would still be more confident to invest in 1st world markets, mainly because of better stability. Third world markets may pose better chances of inflation but this is very risky. Also, you have to consider that the government in most 3rd world countries is very corrupt and this does not help in improving the economy. I would settle for more stable environments as well as those which are historically proven to be profitable.
Yeah, this is one of the reasons it is hard to invest in Emerging Market Funds. Many people use a percentage of their portfolio for riskier type investments like emerging market mutual funds, but even then, they are pretty tame because most of the money ends up in bigger companies anyway.
I have done well overall investing a small portion of my money in diversified emerging markets debt and equity. But it is volatile and more risky overall. Spread the money out... because some companies, municipalities, and even nations are going to fall from time to time. A small investor who might not be able to allocate much more than a couple of grand towards emerging markets debt wouldn't want to just stick those 2 grand in 1-2 bonds costing $1k per bond. That wouldn't offer much in the way of diversification of risk. They could instead put the $2k in something like this: http://quotes.morningstar.com/fund/f?t=TGEIX®ion=USA
I was thinking more along the lines of buying shares but I suppose bonds will do as well. The yields seem rather good but you need to be able to stomach quite a bit of risk. I think I'll take the plunge in the near future and give some of these a try. Thanks for the suggestion.
