Of course, there are many kinds of investment, but one of the most aggressive is emerging. Not surprisingly, they have a upside potential very important and of course above what traditional markets offer. From this point of view, there is a lot of money you can earn. But for the same reasons, leaving you a lot of heritage along the way. It is a risk that you will have no choice but to take if you really want to take positions in these very special financial markets.
For you to be more clear about what this kind of investment consists of, nothing better than to identify what the emerging ones are. Well, these are countries with a fast growth of its economic activity that is related, not only with the internal growth of the country itself. If not, also with a notable increase in trade relations with third countries. In short, its growth potential is very high.
The stock markets of these countries have a better performance in the expansive periods of the international economy, with very vertical climbs in their values. Although on the contrary, they suffer more severe falls in recessive processes. It is for this reason that the stock markets of emerging countries move through economic cycles. It is a factor that you should assess if you are going to take positions from now on. Because undoubtedly you will run more risks than in the other equity markets.
What are the emerging countries?
First of all, you will need to know who are the representatives of these very special economies. Well, fundamentally the BRICS. Who are they? Well, they are the acronyms that represent the most relevant economies of this group: Brazil, Russia, India, China and South Africa. But they are not the only emerging where you can invest the savings from now on. If not, other lesser-known equity markets as well. Like for example, the Turkish, Mexican and even all the Asian dragons. That is, you have a lot of offer where to choose your next investment. Much more than you initially think.
In most of them, growth expectations are very high. To the point that they can generate increases in their respective bags above 10% every year. Even more in the most favorable scenarios for your interests. In this sense, one of the most bullish financial markets in recent years is that of India. With annual revaluations of up to two digits. But you must respect their signs of weakness to leave positions. Because risks are also very important in these scenarios.
Characteristics of these markets
These financial markets are very special and they are not aimed at all profiles of investors. Not in vain, you have to know how to operate with your values and with your tendencies. Because any miscalculation can cost you many euros that will go down the road. If you are a user with little experience in stock operations, it would be better to refrain from any kind of operations in emerging markets. Not even through investment funds. The risks are too high for you to risk your money from now on.
On the other hand, a recent report by a leading financial consulting firm highlights some of the most relevant characteristics of emerging markets. One of the most notable is its high volatility, above other geographic areas. In addition, it must also be taken into account that these countries are in a constant transition. This makes it very difficult to assess the real situation of these markets. This is one of the reasons why the fluctuations in your price are constant and can create some situation of unease. Where you do not know if it is necessary to sell the shares or on the contrary keep the positions open.
How to reduce the risks?
Either way, you have a series of strategies to limit the risks of operations in these special markets. One of them materializes through ETFs o listed funds. It is a financial product that is a mix between mutual funds and the purchase and sale of shares on the stock market. It allows you to better diversify the investment although the risk is always there latent. There are many of these products that closely replicate the emerging markets index. But with the substantial advantage that it presents more interesting commissions for your domestic economy.
Another of the investment models that can be interesting to open positions in these markets are mutual funds. You have a powerful offer by the management companies. Where various emerging markets are included, depending on what your personal preferences are. In this case, its main advantage is that it is an investment that can be diversified with other financial assets. Not only from equities, but also from fixed income or even from alternative models. These funds are intended for periods of permanence in the medium and long term.
India: one of the most bullish
Among all these markets, that of India stands out. It maintains an impeccable upward trend that has made a good number of small and medium investors earn a lot of money. However, it has an added risk and that you should take into account if you are going to open positions at this time. Due to the high revaluation it has had in the last three years, it would not be surprising if there was a strong correction in their prices over the next few months. To the point of seriously complicating your investments.
One of the strategies to enter this Asian emerging market is through investment funds. They are very practical to achieve your goals, without the need for you to have to know the values that are listed in their main stock market indices. More and more managers have turned their gazes towards this geographical area with the appearance of new investment funds. And in this way, you can meet this innovative demand that your investment profile provides. In any case, India is one of the emerging countries that you cannot forget from now on.
What do these markets bring you?
Of course, there are other benefits offered by emerging companies. Because you cannot forget in an instant that they are different markets. And they do not even follow the trend of the stock markets of developed countries. To make it easier for you to operate with the values of this important segment of equities, nothing better than to check some of its most important hallmarks.
- Not all emerging markets are the same, far from it. Investing in equities in South Korea is not the same as in Mexico. The diversity in its proposals it is one of the common denominators of these markets. You cannot put them all in one drawer because you will make a serious mistake that you will regret after a few days.
- The average growth of these markets over the last year it has been more satisfactory than in developed markets. With a performance between five and ten percentage points above these. In this way, the profits will be more extensive in these exchanges.
- It is an investment class that you can not allocate to the medium and long term. Precisely because of its evolution, it can change radically at any time. And in this way, you can get hooked on the selected values. It is another additional risk that you run with this kind of operations in the equity markets.
- They are economies that have a lot growth potential. This is one of the reasons because they are very prone to the operations of small and medium investors. Not surprisingly, they can make profitable their movements in the stock market with much more intensity than in developed markets.
- Some of the emerging markets have been very profitable for several years. As for example, Southeast Asian dragons that have generated returns in their values above the international average. Although with more expansive commissions than in national markets, with double the expense in this concept.
As an alternative to investment
You have to see these equity markets as one business opportunity that is presented to you to improve your checking account balance. For this reason you should not abuse operations. If not, on the contrary, formalize them when the appropriate conditions exist to enter their positions. They will be few times a year or perhaps there are exercises in which they are not conducive. You should be on the lookout for their appearance, so you will have no other solution than to closely monitor their respective markets.
From this scenario, any input signal should be exploited almost instantly. Not surprisingly, you have a lot to gain in each of the operations. But protecting the movements from possible distortions in the equity markets. Because its depreciations are also very vertical, as has happened in recent years. With annual falls of over 20% in some of these bags.