“How” to Invest in Emerging Markets

Emerging markets sell-off began a few weeks ago with volatility not appearing to die down anytime soon. This was due to a variety of factors that spanned from a Fed announcement about cutting down its bond buyback program to political corruption. But a WSJ article headline “How to Invest in Emerging Markets Now” drew my eye. “Wow I can make money!” I thought to myself. But after reading blurb after blurb of the article I came to the very end disappointed with the lack of a “how-to” that I was promised.

This brought my recollection back to reading this past weekend’s paper about “A Word of Advice.. On Advice” by Joe Queenan. As his argument pertained to personal investing advice, no one with good advice to give will give it… openly. Asymmetric information is the basis for financial gains through trade (like arbitrage).

Lets say this was a “how-to guide” though. Like was mentioned in class, a lot of American’s don’t have enough in foreign assets. This is basically shooting themselves in the foot. Diversifying risk is an important principle of investing and emerging markets are a good place to start. So this sounds like a good idea for someone like me to try and make some profit. Even with emerging market’s currencies appreciating against the US dollar in the long term, many other students and I don’t have the assets to actually do anything very profitable.

The equation for ROR (rate of return) is exhibit A. The cost of investment isn’t just the money put into the markets. Its also the time to manage the portfolio. It’s the opportunity cost we have as well. During what some consider the most valuable portion of our lives, is it worth it to forgo other opportunities with money and invest? Is it worth it to start serious saving? Some shmuck college kid like me with hardly at money, isn’t going to get much of any where with oversea assets, taxes and fees to their government’s content. It’d be nice to even try to break even there.

But this doesn’t sound right… I heard time after time again that saving is crucial. But especially now, where returns on investments aren’t high and my bank’s saving accounts interest is hardly above zero, perhaps I should be spending my money now and enjoying my life to the fullest. Now is the time to spend money for those overseas trips and not save in overseas markets.

Remember: The usual rules of investing apply. After fees, active investors on average underperform low-cost index-based funds—even in emerging markets.


One thought on ““How” to Invest in Emerging Markets

  1. viczhou

    I do agree with you that “The cost of investment isn’t just the money put into the markets. Its also the time to manage the portfolio”. As a individual investor, we are highly unlikely to run a portfolio that outperforms those special-theme funds because of a lack of expertise and diversification, as well as asymmetric information. So let’s consider taking a job in an asset management firm lol 🙂

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