This is a much-debated topic among investors as to whether investing in emerging markets is profitable and worth the risk as opposed to the more traditional developed markets. 

Developed countries are the countries that are already developed and have not seen any significant growth in their economy due to sticking to traditional growth practices such as agriculture. e.g. USA, Europe, UK. They are also have more robust and mature economies and have less risk.

Emerging markets are the countries that have witnessed massive economic growth due to the development of industrial and technological sectors. e.g. Russia, China, Brazil, India and Mexico etc. Their economies are a bit more volatile and have higher risk.

Emerging markets (about 80% of countries today) make up over half the global economy but constitute only about 12% of global stock markets. But stats show that their representation on the stock market is on the increase. From about 1% in 1990 to 12% in 2020. *

Emerging market economies usually have a high growth rate but are quite volatile and risky due to political instability, unstable currency, or below average regulation etc. However, do remember that developed countries were also emerging markets at one stage. Investing in emerging markets is to see the potential for future growth. As with any high-risk investment, there is the possibility of high returns as well.

Including a percentage of emerging markets into your investment mix is a good way to diversify your portfolio to spread risk and possibly attain good returns.

Investing is a very personal endeavour and should be done in accordance with your risk appetite and individual financial circumstances. Your advisor will develop a diversified investment strategy that includes both markets. Chat to your Acuma advisor today. [email protected]
*thebalance.com

 

Please note, the above is for education purposes only and does not constitute advice. You should always contact your Acuma advisor for a personal consultation.

* No liability can be accepted for any actions taken or refrained from being taken, as a result of reading the above.