Emerging Markets Through a Different lens.

What is an emerging market and what are some of the advantages and risks of investing in them?

Economists coined the phrase emerging markets in the early 1980s to define investing in developing countries. Although the term is widespread, some don’t fully agree with its definition. I, for one, believe that this general framing approach to classifying emerging market countries is outdated. Today sufficient data is allowing for evaluation through different lenses and categorizing them according to their attributes.

Here are some clarifications that may be helpful:

• Most financial experts agree that “emerging market investments” refers to countries or regions undergoing fast and steady economic growth.
• A widely used formula considers a country’s gross domestic product (GDP) and per capita income to determine if a country is an emerging market.
• The BRIC countries - Brazil, Russia, India, and China - are labeled as examples of developing economies with explosive growth in the past decade.
• Latin and Central American countries - Colombia, Mexico, and the Dominican Republic have also demonstrated steady growth patterns, particularly in the areas of tourism, foreign investments, and real estate development.
• Others such as areas of Southeast Asia, the Middle East, and Africa are still in the early stages of developing a strong economy and stable environment. Other Metrics:
• Diversification: portfolios that included Emerging Market stocks have historically produced higher risk-adjusted returns?(Bouslama and Ouda).
• Relative Economic Growth: Emerging Markets are expected to account for 70% of global economic growth through 2025 with middle-class spending growth being the main driver?(McKinsey & Co).?
• Growing Middle Class: by 2025 Emerging Market consumption will represent approximately half of global consumption?(McKinsey & Co).?
• Equity Market Expansion: Emerging Market equities represent only 11% of global equity market capitalization?(Source: MSCI), yet their economies represent approximately 45% of global GDP?(Source: International Monetary Fund).

Equipped with an updated guide based on the available data, as the initial step toward evaluating the merits of an emerging market and its viability of an investment. Should provide sufficient clarity as to which market represents the best investment opportunities, providing the potential for high yields and portfolio diversification.

Now let's talk about the risks of investing in emerging markets.

The risks are often categorized in three ways:

1. Political risk.?Emerging markets may have unstable, even volatile, governments. Political unrest can cause serious consequences for the economy and investors.
2. Economic risk. These markets may often suffer from insufficient labor and raw materials, high inflation or deflation, unregulated markets, and unsound monetary policies. All of these factors can present challenges to investors.?
3. Currency risk. The value of emerging market currencies compared to the dollar can be extremely volatile. Any investment gains can be potentially lessened if a currency is devalued or drops significantly.

In conclusion, evaluate emerging markets and the potential investment opportunities each can represent. Your evaluation requires a holistic approach that, not only considers the measures provided by a standard investment analysis but also incorporates CLARIFICATIONS, METRICS, and RISKS into the decision-making process.

#emergingmarkets #developedvsemerging #briccountries #lataminvestments #emerginworld #jointhecrowd #joinREI #reicrowd #rei #realestateinvestments #newassetclass #forwardportfolio #latinzones #portfoliodiversification #lataminvest #latam #reicrowdfunding #REC #realestateinvestment #realestateinvestor #realestateinvestors #investors #invest #biggerpockets #realestateeducation #investing #lawofsucces #realestatewholesaler #multifamilyinvesting #brokerdealer #Ethics #emergingmarkets