Global Investment Options for the New Year
Stock indexes are near all-time highs with the average price-to-earnings ratio of the S&P 500 over 25 times earnings. Even traditionally conservative sectors like consumer staples are getting overpriced, making it difficult to find good deals and value buys in this market.
But despite the highs the domestic markets are hitting, that doesn’t mean value can’t be found. Globalization has changed the way investors make trades and diversification means expanding your portfolio to include overseas markets.
Going overseas to find new investment opportunities can be a good strategy, but with so many possibilities, it might be difficult to find real value. Emerging markets offer the most returns to investors and recent developments have churned up value opportunities that Wall Street hasn’t quite caught on to yet.
The New BRIC
The BRIC countries – Brazil, Russia, India and China – have been the leading emerging markets for investors to put their money for the past decade and more. But deep recessions in Russia and Brazil have made investments there unwise and unprofitable. Emerging market BRIC funds have been experiencing huge outflows as investors lose faith in these countries’ economies and a new paradigm begins to emerge.
Despite the decelerating economy, China remains a profitable investment option. GDP growth is still nearly triple that of the US’s economy while India continues to grow through radical political reforms that’s opening its economy up to foreign investment.
That leaves two unaccounted for though. The new replacements are Taiwan and South Korea – affectionately known as TICKS. The big energy companies of Russia and Brazil are no longer the engine of growth. Instead, technology is the new generator and Taiwan and South Korea deliver big. Companies like Samsung – a South Korean company – are making waves in the technology world with innovative ideas that are changing the way the world works.
At the forefront of IoT, Samsung is a leader with its new smart-fridge, which allows consumers to literally see what’s inside their fridge and place orders for meals all from the kitchen. But it’s not just technology that’s driving these economies. South Korean make-up company AmorePacific gained more than 150 percent in the past year, revealing just how much the emerging middle class means to emerging market growth.
The former BRIC economies are giving way to an explosion of middle class growth and the TICKS countries are well prepared to supply the demand. The new technological revolution, combined with the growth in the middle class from former BRIC economies should drive growth going forward.
Investing overseas carries unique risks that investors need to be aware of. Currency fluctuations can add or subtract to real world gains and with the dollar hovering near all-time highs, loss due to exchanges is a real concern. Additionally, technological growth is decidedly unsteady, making markets unpredictably unstable, as well.