Growth of Emerging Markets

by Dual Income No Kids on October 23, 2009 · 0 comments

Emerging markets are arguably a force to be reckoned with and something to pay attention to if you are interested in diversifying your risk and potential gains.

The biggies out there are the BRIC; aka Brazil, Russia, India and China. Together they comprise over 40% of the global population and have experienced rapid economic growth in recent years.
As infrastructures are developed and consumer spending increases, emerging economies often expand faster than already developed nations. For example, in 2008 GDP of China and Brazil grew more than 7% compared with only 1.1% in the US.

Given the steep gains to be had in emerging markets, impressive stock returns have driven stocks up 36% between January and mid-June 2009. Given what we know has been the reality here in the domestic market, this is certainly stark contrast. However, previous to that, in 2008, investors fled the market and it tanked by more than 54%.

Of course with great potential gains come the flip side of potential risks. The main volatility comes from countries having less stable political, legal and financial systems, low liquidity, and currency swings.

For what its worth, we’ve been putting more of our money into companies that have exposure to emerging markets. For example, last week we picked up an additional 500 shares of the Finnish Cell Phone giant Nokia. The company has been taking a beating, but is better placed to sell mobile devices in the developing world that its US rivals.

Readers: What is your take on emerging markets and whether or not you are invested or interested in doing so.


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