Emerging Markets

Remember, at DeGreen Capital Management, we invest in all the world’s most promising markets and sectors. These include markets in the United States, in other developed countries, and in emerging markets.

The Role of Emerging Markets in Your Portfolio

Rio de Janerio, Brazil
There is simply no denying the exciting potential, and impressive historical performance, of the world’s rapidly-growing emerging markets. In fact, while they certainly involve risks, emerging markets may dominate portfolio decisions, and long-term portfolio performance, for years to come.

What is an Emerging Market?

  • Eighty percent of the world’s population – about 4.3 billion people – live and work in emerging market countries such as China, India, Brazil, Russia and many others.
  • Emerging markets already account for about 40 percent of the world’s economy (GDP), and for more than 75 percent of the world’s economic growth each year!1
  • Emerging markets are transitional economies that have embraced free-market (if not always free political) reforms.
  • Emerging markets contain a massive – and rapidly growing – number of middle class consumers. They all aspire to their version of the American Dream.
  • Emerging markets have adopted many legal and economic reforms to qualify for participation in world trade and investment.
  • Emerging market economic growth rates have been several times greater than growth rates within the U.S. and other developed countries. Meanwhile, emerging market investment returns have been significantly higher than returns within the U.S. and other developed countries. Click here to examine comparative statistics.
  • Meanwhile, the average market volatility of emerging markets is much lower than many U.S. investors believe. Click here to examine comparative statistics.

Click here to see updated comparative data, and other data, from The Emerging Markets Book, 2nd Edition.

Risks

While emerging market risks certainly exist, DeGreen Capital Management, LLC, believes that the risks are often overstated here in the U.S. The U.S. perspective is often caused by a lack of familiarity with emerging markets, or to dated perceptions of these markets. Many U.S. investment advisors are not well informed in this area. It’s not their fault. It’s very difficult to remain fully informed in this complex arena. Yet, emerging market risks can be mitigated with professional, expert, investment management.

Nevertheless, several risks are commonly cited in the U.S. with respect to emerging market investing. You will notice that some of these risks may exist right here in the U.S., although – we would hope – to a lesser extent than elsewhere:

  • The risk of nationalization or expropriation of assets or confiscatory taxation;
  • Social, economic and political uncertainty;
  • Dependence on exports and/or the corresponding importance of international trade and commodities prices;
  • Less liquidity of securities markets;
  • Potentially higher rates of inflation (including hyperinflation);
  • Government decisions to discontinue support for economic reform programs and imposition of centrally planned economies;
  • Less stringent laws regarding the fiduciary duties of officers and directors and protection of investors

Should You Invest in Emerging Markets?

Emerging markets may offer you and your family an effective way to rebuild your investment portfolio, as part of your overall investment strategy.

But how much should you invest in emerging markets?

We devote chapters Seven and Eight of The Emerging Markets Book, 2nd Edition to this subject. Chapter Seven is available for free on this website.

Regardless where, or how you invest, your portfolio allocations should reflect your investment time horizon, your risk tolerance, and your overall investment objectives. Therefore, you may devote a greater or lesser amount of your overall portfolio to equity investing generally, or to emerging markets specifically. We would be honored to help you achieve the allocation that is right for you.

Learn more about our DeGreen-Direct Platinum, DeGreen-Direct and DeGreen-Plus investment programs.

1Source: IMF at purchasing power parity (PPP)

Copyright ©2012 DeGreen Capital Management

MATERIAL DISCLOSURE FOR DEGREEN CAPITAL MANAGEMENT LLC. DEGREEN CAPITAL MANAGEMENT LLC IS A FEE-ONLY INVESTMENT ADVISOR REGISTERED WITH THE STATE OF ARIZONA, AND MAY ACCEPT CLIENTS THROUGHOUT THE UNITED STATES. A MORE DETAILED DESCRIPTION OF THE COMPANY, ITS MANAGEMENT AND PRACTICES IS CONTAINED IN ITS REGISTRATION DOCUMENT, FORM ADV PART II. A COPY OF THIS FORM MAY BE OBTAINED BY CONTACTING THE COMPANY AT 4800 NORTH SCOTTSDALE ROAD, SUITE 1500, SCOTTSDALE, AZ 85251. PHONE: 480.609.9900. PAST PERFORMANCE OF SECURITIES OR OF INVESTMENT STRATEGIES EMPLOYED, IS NO GUARANTEE OF FUTURE RESULTS OR RETURNS. INVESTMENT RETURN AND PRINCIPAL VALUE WILL FLUCTUATE SO THAT AN INVESTMENT, WHEN SOLD OR REDEEMED, MAY BE WORTH MORE OR LESS THAN THE ORIGINAL COST. INVESTMENTS IN FOREIGN MARKETS, EVEN WHEN MADE THROUGH U.S.-TRADED ETFS, ARE SUBJECT TO VARIOUS INVESTMENT, TRADING, AND FOREIGN EXCHANGE RISKS, AND OTHER RISKS, INCLUDING THE RISK OF POSSIBLE LOSS OF PRINCIPAL. ALL INVESTING INVOLVES RISK, INCLUDING THE POSSIBLE LOSS OF PRINCIPAL. PROSPECTIVE INVESTORS SHOULD UNDERSTAND THESE POTENTIAL RISKS BEFORE INVESTING.