What Does it Take to be an Emerging Markets Investor? G&M

The Globe and Mail recently had an article about what it takes to be an emerging market investor which began by quoting London Business School economists Elroy Dimson, Paul Marsh and Mike Staunton, who, in a report this year prepared for the Credit Suisse Research Institute, had stated:

“While the start of the 21st century was a lost decade for developed markets, emerging-market equities powered ahead… From 2000 to 2010, the annualized return on the MSCI Emerging Markets index was 10.9 per cent, versus just 1.3 per cent for developed markets… Since then, euphoria has segued into disappointment. Emerging market equities, bonds and currencies fell sharply in mid-2013 … This triggered headlines such as, ‘West is best’ and ‘Emerging markets a costly mistake.’ ”

They go on to make the case using data from 50 countries going back to 1900 that emerging markets are not as bad as the skeptics might expect. And though they are more volatile than developed markets, the gap is closing.

On the other hand, George Christison, a retirement and investment planner and the founder of InvestingForMe, was quoted as saying:

“I have never understood why anyone would invest in emerging markets. Simply, I do not know anyone who has ever consistently made money investing in them.”

In addition, Dan Bortolotti of PWL Capital Ltd. also added that “investors should be prepared for a bumpier ride in pursuit of higher returns” if they want to invest in emerging markets.

Nevertheless and for investors still looking to take the plunge into emerging market investments, Christison had the following three warnings:

  • Emerging market stocks are not necessarily governed by the same accounting and disclosure rules as North American companies.
  • The legal and business framework for an emerging market stock can be different than for a Canadian or US one.
  • The annual reports and financial information may be published only in a language you don’t understand.

To read the whole article, What does it take to be an emerging markets investor?, go to the website of the Globe and Mail.

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