Why Emerging Markets Are Great Investment Opportunities

Investors should look at the world's emerging markets. Why? Because now, developing markets are where the growth opportunities are. A full 43 percent of the world's wealth is in those nations, and most of the world's people — 5.5 billion, in fact — are in such countries as well. The world's developing nations are growing faster than the developed ones.

That faster growth can lead to higher profits than you may get from similar investments in the established markets found in North America, Western Europe, Australia, and Japan.

Bottom line: The needs in emerging markets are creating exciting opportunities for investors. Meeting the needs of the world's emerging middle class is enough work to keep many companies profitable for decades to come.

Here's why these markets should interest you as an investor:

  • Uncorrelated returns: One of the many attractions of emerging markets is that the risks are very different from those in developed countries. The United States and Western Europe have similar economic cycles, for example, but the United States and South Africa are in different cycles. One country is fully developed and last had a revolution more than 230 years ago. The other is rapidly developing after a peaceful revolution just 20 years ago.

  • New technologies: One reason companies in emerging markets have pursued new technologies is because many of these countries have poor infrastructure. That poor infrastructure has turned into a strange advantage because innovators aren't tied to an existing way of doing things. The result is that some of the best technologies for mobile telephones and solar power have come out of emerging markets, which have few land lines or electrical generation facilities.

  • New markets: The world no longer follows the old mercantile model, in which rich countries bought materials in poor countries, took them back home to their factories, and then brought the manufactured goods back to the poor countries to trade. Instead, everyone trades with one another. A company in China working on low-cost solar power has a ready market in Nigeria. An Indian company that develops a $2,000 car for the new middle class there can sell it in Indonesia and Malaysia, too. A Mexican cement manufacturer can find customers in the United States and in El Salvador.

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