Judging Emerging Markets When Making Investments

It finally appears that one of the most challenging and protracted recessions in modern times is coming to a close. Thus, there are many individuals who may be considering a rather serious foray into the investment market. While it is indeed true that there is a good amount of money to be made in such a way, there are a few factors that should be carefully considered before any such venture.

A Look at Emerging Markets

First of all, it is important to understand the term “emerging market”. It can be used in two different ways. Some consider that as we are exiting a recession, we are currently in an “emerging” market. Although this is true, an emerging market is more commonly referred to as a niche sector that is undergoing or is expected to undergo a substantial amount of growth. Obviously, placing oneself in an entry-level position in this situation can lead to a good deal of profit.

Martin Taylor presenting

Martin Taylor presenting

The Commodity Question

Many individuals have touted the commodity market as being one of the most reliable and stable forms of medium- to long-term investment. In fact, this is quite true. Historically speaking, the prices of precious materials, oil and minerals tend to rise. So, many first-time investors will choose to diversify a portion of their portfolio into this sector, for it can help secure growth over time.

However, keep in mind that what goes up will come down (an example of this can be seen in the massive drop in the price of silver by the ounce in recent years). Even commodity markets will suffer their fair share of falls; particularly if the manufacturing industries or the physical demand slows. Keeping a close eye on any emerging technologies and understanding the raw materials that they may require is an excellent way to become involved in a commodity and turn a handsome profit.

A photo of Nick Barnes

Nick Barnes of Nevsky, at a conference

Forex Trading

If commodity trading can be considered a long-term investment strategy, Forex (or currency) investments are on the other end of the spectrum. In essence, a Forex trader will closely follow trends in the prices of currencies around the world. Should a gap between two different types of currency exist, one or both may be purchased under the premise that subsequent changes in price will accrue a profit.

Also, a Forex position can be used to capitalise on an emerging market such as shale oil (as this commodity is listed in dollars, any major announcement may cause the dollar to quickly strengthen). This market operates twenty-four hours every day and is considered to be by far the most liquid available. As a whole, investors will generally not place a great deal of money into the Forex sector; they will rather use a small position to possibly obtain a reasonably high turnaround.

Still, the short-term nature of this strategy will involve a much higher degree of risk. This is the reason why any such position should be established only after careful study or under the guidance of a professional.

These are but a few examples of how emerging area can be judged in different sectors of the marketplace. Naturally, all risk can never be eliminated with any investment strategy. It is nonetheless possible to experience success should these opportunities be approached with prudence and foresight.

Deciding on future investments

Our recent post, outlining the S&P view of the Eastern European Fund from Nevsky Capital has caused a fair bit of interest. In particular, a number of people have contacted us to ask for more information on how to decide on where to invest.

Although it’s always interesting to receive such emails, we do need to make it clear that we don’t offer investment advice. If you are seeking such advice, then it makes sense to speak with a qualified professional.

We’ve also been asked whether information that is provided by Standard & Poor, or other agencies, can be used to guide an investment strategy. There, it should be said that reports provided by such agencies are only part of the knowledge mix that’s availabe.

It’s also possible, for example, to find plenty of information from a variety of other sources. As with anything, it’s useful to check the nature of those sources, before making deicsions. Might there be reasons, for example, why you should trust some more than others?

You need to think closely about why someone is providing information or advice. Do they have particular motives? It may be that they simply provide factual data, although there is often a cross-over between facts and wider analysis.

For our part, we’re glad that there has been such interest in all of our previous posts. We certainly welcome feedback and would love to hear more of your comments. When making your own investment decisions, however, it’s critical that you should consider your own requirements and that you should seek the best, relevant advice.