|
We all know that to build a future we need a solid foundation – be it an actual building or a pursuit in life. The same is true in building capital wealth. It is human to become comfortable with a style of investment or particular markets. But if we want our capital to continue working well, and ensure our investment strategy is still relevant to the ever changing markets, then we need to look beyond our traditional investment methods.
BRICS has become the often used acronym for developing markets, although some take it more specifically to mean Brazil, Russia, India and China. For many though, the thought of investing directly in these far away places is abhorrent.
But it is worthwhile to note that the US growth is slowing to about 3% GDP, UK sub 3% and Australia about 2%. This contrasts with forecast future growth of 8% in China and 5-6% in the major developing countries.
Over 60% of total world growth comes from the non-western nations and this proportion will climb at a faster rate as western economies reach ‘full consumption’. How many cars, plasma screens can we enjoy? This is one of the reasons why western economies are awash with cash looking for an investment home – and a bigger portion of western funds are following the yellow brick road.
Within three decades the combined size of the BRICs economies will rival those of the current four economic super powers – USA, Japan, UK and Germany. We cannot ignore this major investment paradigm shift.
Direct investing in these sunrise economies is not necessarily as hard as many might think. If you are a technical investor then a thorough knowledge of the day-to-day mechanics of companies is not so essential. However, you may not want to invest directly in all of these countries, if so, then it is simply a matter of identifying one with which you feel comfortable with – for example identifying a market such as Hong Kong which will give you access to China.
And if you don’t want to take the big step of direct investment, then managed funds is an easier option. There are many fund managers that have BRIC market specialists, but do your research, because with fund managers - some do well and some do poorly.
If you are not yet ready for this major change in your investment strategy, then you should at least start doing some homework!
Enjoy the ride
Tom Scollon
Chief Analyst
|