- Emerging Markets witness rapid economic growth but have low per capita income and experience currency swings.
- Being undervalued, investors eye emerging markets as an investment option.
- One can adopt various ways to invest in emerging markets.
Emerging markets are those nations that can witness rapid economic growth. Emerging markets are nations undergoing the process of a full-fledged industrialisation. These markets are hubs of innovative start-ups, manufacturing and technology driven initiatives, showcasing huge future growth potential. However, these economies usually have low per capita income and experience currency swings.
Due to these features, emerging markets are undervalued and provide investors with an opportunity to rake in quick gains. However, these investments are subjected to risk, and may lead to losses for investors.
In the article, we will dig deeper to understand more about investing in emerging markets. .
Why are investors’ eyeing emerging markets?
Despite high levels of volatility attached, these markets offer an opportunity to experience high growth and return, being fast growing economies. Thus, investors eye emerging markets as an investment option. However, investors must always be cautious of limiting risks in these markets.
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Among the above-listed options, International ETFs are the easiest way to build exposure. It is because of the cost effectiveness and taking exposure of a portfolio of assets.
In Australia, an ASX listed exchange-traded fund (ETF) can be an option to invest overseas. To name a few-
- Vanguard FTSE Emerging Markets Shares ETF(ASX:VGE)
- iShares MSCI Emerging Markets ETF(ASX:IEM)
- Fidelity Global Emerging markets Fund ETF (ASX:FEMX)
Another low-risk option is to invest in Mutual Funds taking exposure into emerging markets, however, ETFs are much cheaper.
By investing in these funds, an investor can gain exposure to countries like China, India, Brazil, amongst others.
Investors need to keep in mind factors like costs, liquidity, and other risks, including the political and economic ones in emerging markets.