While developed countries as a whole have been suffering from disappointing stagnation and slow growth for several years now, experts are seeing a huge potential in the emerging economies from the developing world to progress and soon take the lead in the global equities market arena. This is perhaps the primary reason why major investments firms, including offshore mutual fund providers like LOM Financial, built portfolios around emerging markets.
With such unpredictable improvement, many young and seasoned investors ask the same questions: should you put your money and invest in the emerging markets? More importantly, are the risks from investing in these emerging economies worth their potential returns?
It’s true that many analysts consider emerging markets (EM) to be risky and pondering on whether to put your trust in the new players in the market should always be your first step. However, it should also be pointed out that many successful investors got to where they are now by taking on equally risky yet calculated decisions.
The truth is, there’s quite a number of developing nations that are starting to thrive in this high-growth environment, promising higher returns than their developed counterparts – and these are not just opinionated predictions but from observable statistics. In fact, recent reports have shown that EMs are responsible for delivering 50 percent of the developed market’s trade.
In addition, the current performance of the emerging market’s equity valuations has been outstanding, recording a long-term average price-to-earnings ratio around 25—a leap from its 2017 cyclically-adjusted P/E ratio of 13.
However, the most persuasive yet often undervalued feature of EM lies in its demographics—bigger, younger and greater consumption. This is because an estimated 80percent of the world’s youngest consumers live in developing countries, promoting optimistic economic growth compared to developed and aging nations.