International Diversification

  • 03 Mar
    Why An ETF Is The Wrong Way To Invest In Emerging Markets

    Why An ETF Is The Wrong Way To Invest In Emerging Markets

    • Irrational market sentiment and low liquidity create high volatility that can easily be seized by smart investors. Just do the opposite of what the crowd does.
    • Despite what the market might think in a certain moment, emerging markets and businesses grow alongside economic development and positive demographics.
    • ETFs are the crowd and due to their construction and rules, ETFs represent buying high and selling low, which is a terrible strategy anywhere but it’s extremely costly on volatile emerging markets.

    Introduction

    I have a positive bias towards emerging markets because of their positive demographics, growth aspirations, and low starting level from a macroeconomic perspective, and because, from a behavioral perspective, emerging markets are completely irrational, much less liquid, and highly volatile, especially individual stocks.

    You might wonder why I like volatility, low liquidity, and irrational behavior. Well, at the first sign of fear on financial markets, everybody rushes to sell their emerging market position. This, combined with low liquidity, creates huge volatility which is the best investing opportunity if you are a value/growth investor. More →

  • 22 Feb
    What Will The Economic World Look Like In 2050?

    What Will The Economic World Look Like In 2050?

    • Emerging markets will be the economic leaders of the world.
    • Investment returns are related to economic performance, so it’s wise to be internationally diversified.
    • However, diversifying just to diversify is the biggest mistake you can make as emerging markets are full of risk.

    Introduction

    PricewaterhouseCoopers (PwC) just released its report on what the economic world will look like in 2050. You might wonder what that has do to with your investment returns as 2050 is 33 years from now, but it has everything to do with your returns if your investment horizon is longer than a few years because these global trends that will shape the world up to 2050 will also be the trends that will shape your portfolio returns. More →

  • 06 Jan
    This Is Why You’ll Want To Take A Closer Look At Investing In China

    This Is Why You’ll Want To Take A Closer Look At Investing In China

    • The large GDP-credit gap in China could be a win-win; panics should be seen as an opportunity to buy on the cheap.
    • Forecasts for the yuan are negative indicating further depreciation. Don’t fight the positive dollar trend for now.
    • Some sectors are going to get crushed by China, thus it is a threat.

    Introduction

    In the last two years, China has shaken the markets twice: once when the Chinese market correction began in August 2015, and when it seemed that we were in for a Chinese/global recession in January 2016. More →

  • 03 Jan
    Do You Need To Invest In Frontier Markets To Be Well Diversified?

    Do You Need To Invest In Frontier Markets To Be Well Diversified?

    • Due to low liquidity, frontier markets are highly influenced by foreign capital inflows and outflows.
    • Political risks, exposure to oil, and variegate PE ratios advise against investing in frontier market ETFs.
    • However, there is one low risk high reward option.

    Introduction

    A frontier market is a developing country not big enough to be considered an emerging market. The term describes smaller, less accessible, but still investable markets. Such investments are considered high risk because of high volatility and lack of information.

    Small markets usually have low liquidity and are very sensitive to foreign fund flows. Capital inflows alongside positive sentiment quickly lead to a bubble. More →

  • 22 Dec
    Advice On Value Investing In Emerging Markets From Mohnish Pabrai

    Advice On Value Investing In Emerging Markets From Mohnish Pabrai

    • Investing in emerging markets still offers 100-baggers, the problem is that most investors don’t stick with them.
    • Looking for 100-baggers can make your portfolio, but it can’t break it because you can only lose 100% of the investment while the upside is unlimited.
    • Great investments can be found everywhere, you just need to know what to look for.

    Looking Around The World For Value

    It gets harder and harder to find stocks that have positive future business perspectives, a low valuation, and a price to book value that gives you a margin of safety when investing. Therefore, it’s necessary to do some research on such investments at a larger scale, especially in emerging markets. One person who is a specialist on this is Mohnish Pabrai. More →

  • 21 Dec
    Should You Invest In Russia? Sven Tells You Why It Might Not Be Such A Good Bet

    Should You Invest In Russia? Sven Tells You Why It Might Not Be Such A Good Bet

    • The numbers make Russia the cheapest global market.
    • However, most of the market is made up of energy and financials, while normal companies are fairly priced.
    • Long term economics in Russia aren’t positive as the country is completely dependent on oil prices.

    Russia As An Investment Opportunity

    Russia has been the best performing market year-to-date and is up 50%. However, it’s still considered by many in the financial environment as one of the cheapest global markets as it’s still far from the pre-sanction and higher oil prices levels of a few years ago. More →

  • 08 Dec
    Brazilian Investment Opportunities

    Brazilian Investment Opportunities

    • Many stocks in Brazil have the potential to double in 2017, but they also have the potential to lose 50%.
    • We’ll briefly describe investment opportunities and our approach to the research.
    • Emerging market volatility should be considered a great thing, not a risk.

    Investing Rationale

    Monday we discussed the current situation in South America. Reading the article, available here, will give you a good intro into what we’ll discuss today.

    The source of our long-term investment ideas comes from constant research on macro trends. These ideas are bound to benefit from positive economic, demographic, and political environments. More →

  • 05 Dec
    A Look At Opportunities In South America

    A Look At Opportunities In South America

    • Intensified selling is making emerging markets an interesting opportunity, will selling get to January levels?
    • Brazil has to be watched, of course, but Argentina has too much political risk for rational decisions to be made.
    • Chile is stable, but PE ratios are also much higher.

    Introduction

    After Trump was elected, many emerging markets were hit as a result of a growing negative sentiment toward their performance amidst tougher global trade.

    It’s great when prices go down as it allows you to buy stocks at better prices, if you don’t own too much of the stock, of course. The truth is that many businesses won’t be affected by Trump’s decisions, so it’s a good time to shop around.

    Today we’ll take a look at opportunities in South America. More →

  • 18 Nov
    Global Risks Look More Like Opportunities

    Global Risks Look More Like Opportunities

    • From an investing perspective, global risks represent more of an opportunity than real risk.
    • Some chain reactions might still arise from fiscal risks in Europe while many global risks are of a short-term nature.

    Introduction

    Each year, the World Economic Forum (WEF) publishes its Global Risk Report. It’s a great, comprehensive analysis to look at to better understand the world we are living in.

    Today we’ll analyze the global risks from an investing perspective and will arrive at interesting conclusions. More →

  • 15 Nov
    Finding The Equilibrium In Emerging Markets & Why You Need To

    Finding The Equilibrium In Emerging Markets & Why You Need To

    • Emerging markets are volatile and considered risky, but the economics are great.
    • We can’t fight the market without looking at the risks, but what we can do is rebalance our portfolios and do some dollar cost averaging.
    • Such a strategy allows you to grasp the benefits of great economics and lower valuations while eliminating volatility risks.

    Introduction

    Last week was very interesting for emerging markets.

    Trump’s win sent shockwaves around the world and such movements usually hit those markets the hardest that don’t have much relation to the U.S. but are considered risky and therefore, investors quickly pull funds out of those markets. More →

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