The emerging market has changed just as all markets change with time. Today, the return may not be as great as it was only a few years ago, especially if you do not understand how to choose the best emerging market.
The truth today as explained by Ruchir Sharma of Morgan Stanley is not to pick the right industry sector but to choose the best country. In order to choose the right country you must look at different factors. Today, the top emerging markets include South Africa, China, India, Brazil, and Russia, but before you start investing you should learn the answers to a few questions to help you better know which emerging is the best for you.
State owned businesses perform worst in most cases than private companies. Countries like Russia and China own quite a few businesses, which makes these countries a less profitable investment.
If the country has a large middle class that growth of the country as well as its economy has already hit the top and would make it less profitable investment.
What the economy of the country rely on is also a major factor. For countries that rely on commodities as these can change quickly. Russia is dependent on oil and gas, whereas demand has slowed for China, and Brazil produces oil as well. Those that do not rely on commodities are the best chooses.
Another thing to look at is if corruption is prominent in the country. Countries that accept bribes often have a worst economy so you should look for those with declining corruption.
The leadership of the country and their own ideas may be one of the critical decisions makers. The leader needs to have progressive ideas such as the Philippines and Mexico. Leaders that are more interested in staying in power than in progress are countries that should be avoided as well.
Pay attention to investors in the emerging market and learn where they are investing. If they are investing in other countries than their own, there must be some underlying reason. This may be a warning sign.
If the country’s manufacturing sector is hot and doing very well, this is a good sign. This helps the economy and could be a great investment for your money.
How many wealthy individuals are in the country? Do they always stay at the top? Are they rich due to government connections or their own ingenuity? A country without several billionaires is usually a better economic country than one that government officials and others involved in the government possessing all the money.
Emerging markets funds can be a great investment if you pay attention and study the markets before making a decision.