International and emerging markets funds are the key contributors to the globalization of financial market and one of the main sources of capital inflow in the emerging markets. They demand investors patience for a high risk and a subsequent reward which comes with these high octane investments.
Not every market is alike, for example Russia offers excellent growth with great political risk and government intervention whereas China is mostly export driven economy and susceptible to a fall out in the global markets. It is quite common for them to fall 60% and than give a return of 100% next year. When global market suffers, like the one in 2008 most of the financial institutional investors will be quick to move money out of these market and thus exacerbating their decline. Here is a snapshot of these individual markets and possible investment options, if any:
Russia: Too much of political risk and uncertainty. ING Russia fund LETRX can be used for a very high risk/return investment. Note:LETRX is available as no Load in Schwab brokerage.
China & neighboring region: Best long term bet for growth and investment. Started from a low cost producer and exporter of myriad small and big items, now it is biggest financier of US treasuries. Investors like us can use FXI or MCHFX as a proxy to investment in china.
India: Good bet for long term investment, burgeoning educated middle class and self sustained economy provide enough fodder for growth. However Infrastructure and lack of commom amenities can put a damper on growth. Investment vehicle for India: MINDX, IFN and PIN
Latin America: Commodity driven economy, too cyclical in nature. Great for a trade via FLATX, PRLAX and few ADR's trading in US like PBR, AMX etc.
Frontier Markets: I still don't call eastern Europe, Africa and middle east an emerging economy, they are frontier markets. Financial markets is still in nascent stage and offers little in terms of disclosure and account abilities. Hence it is better to avoid these markets all together or have no more than 2% of total portfolio. For 'us' retail investors, Fidelity - FEMEX and T Rowe Price - TRAMX offers some investment opportunities in these frontier markets.
Although emerging economies may be able to look forward to brighter opportunities and offer new areas of investment for foreign and developed economies, they need to consider the effects of an open economy on its citizens. Furthermore, investors need to determine the risks when considering investing into an Emerging markets.
Natural resources influence a significant portion of world economy. Our appetite for different commodities is ever increasing, plus with close to double digit growth in BRIC countries commodity prices are increasingly correlated to supply and demand. One thing to note here is "Supply is limited", so what happens to the prices? It doesn't take business degree or investment experience to figure out.
Look into Legendry investor "Jim Rogers" commodity index and you will see all it includes is agri, oil, metal & minerals. http://www.rogersrawmaterials.com/
One thing a common investor like me should always remember "Commodity trading is very volatile", probably suited for a very long term investment or a pure speculative play. Recently there was a news that owing to fall in copper prices, china is stockpiling copper for future construction and growth. Isn't it leading to volatility and prices become too sensitive to supply and economies health?
Lets start with how and what you can do to be part of this trade.
Individual stocks: Starting from copper like Freeport copper and Southern copper to Steel stocks like US steel and Nucor. More contrarian investment can be in agricultural stocks like Agrium, Monsanto etc.
ETF: Starting from broad natural resources etc like GSG, RJI etc to concentrated commodity funds like DBA, DBC and yeah 'MOO' too.
Gold ETF: GLD & IAU are best with high trading volumes. If you like Gold and Silver together, than there is 'CEF', central fund of canada
Leveraged ETF: double short and long ETF for short term trading etc.
Mutual funds: Nearly all mutual fund houses offer a natural resources funds. Some are tied with stocks like FNARX, PRNEX & PSPFX, whereas some are tied with treasury & futures like PCRDX & RYMBX.
disclaimer: I own Freeport copper stock (FCX), PSPFX and PCRDX.
A year back when oil prices were soaring, everyone from presidential candidates to average joe were talking about alternative energy and how to come up with less dependence on foreign oil. This lead to the boom in new funds and etf offering alternative energy investment.
Mortgage mess not only dragged entire stock market, each and every sector, it also pushed oil prices far below 2004 level. Now once more alternative energy and stocks are in back burner. BUT, it may be one of the best times to wet your feet into this sector. There are bunch of offering starting from clean energy, alternative energy, solar, green, wind etc.
• The New Alternative Fund, Symbol NALFX, began 1982: investments in a variety of companies focusing on renewable energy sources, as well as interests in companies focusing on energy conservation and environmental protection
• The Guinness Atkinson Global Energy Fund, symbol GAAEX, began 2006: The fund invests in global companies that “derive more than 50 percent of their revenue from alternative energy or alternative energy technology.
• PBW is a Power share ETF that holds companies in the "business of the advancement of cleaner energy and conservation
• The Winslow Green Solutions Fund, WGSLX. It expects to invest globally in companies of varying sizes that provide green solutions. Winslow defines green solutions as products or services that reduce resource consumption; decrease pollution such as climate-changing greenhouse gases, or contribute to natural and sustainable nutrition and health
Gold - Bull or Bear? It is actually an asset that is sold in crisis to raise funds. The primary trend is up since all critical drivers for gold are still pointing towards much higher gold prices the years ahead.
US$
Suppy / Demand
Oil
Let me know what you think on gold as an investment vehicle when hedge funds and real estate seems to be a riskier bet?
disclaimer: I currently own fidelity select gold, fsagx.
