Jonock's Blog : Safe Investing in Emerging Markets

Prudent investors realize that they must make investments in emerging markets if they hope to survive as an investors in the future. But with different book-keeping rules and shaky governments how can we be sure our moneys safe?

The emerging markets are playing a bigger and bigger part in the day to day economic roller coaster we call the stock market. There are some facts that need to be taken in to consideration in regards to the major emerging markets such as South America and China. Third world counties have a well educated, intelligent work force that is capable of building the highest quality manufactured products. Due to the reduced labor cost in these countries their products can be marketed at a more competitive price than similarly produced US and European goods. The best price and quality of goods will always dictate and rule the market. The most bang for your buck. A classic example over the last decade here in America is the majority of consumer goods purchased by Americans are manufactured in emerging market countries. This is a fact of life that will never change. It is the future we can't go back. The US “rust belt” will never make the world's steel ever again. The cotton mills of the south are gone forever. When we accept the real situation we can see that the large number of “jobs” lost sin America were not due to a recession but are as a result of a changing world, a transition. A transition brought on by progress, technological development and education of the world's masses. Americans must come to realize we need more more education and training in physics, mathematics and engineering if we wish to continue as the world leader in ideas, solutions and concept technology.

There is no doubt in my mind that the major future stock growth will be in emerging markets. If you are nervous in making major investment directly in emerging markets one way to reduce the risk of investing in emerging market equities is to go with the largest companies by sales or profit margin.

The world’s five largest companies by 2008 revenues are Royal Dutch Shell (RDS.A, RDS.B), Exxon Mobil (XOM), Walt-Mart (WMT), BP and Toyota (TM) according to Forbes. The oil giant Royal Dutch Shell’s revenue totaled $458B while Exxon Mobil raked in $425B. The world’s largest retailer Walt-Mart had total sales of $405B. Revenue matters since with high volumes companies can make billions even with a low profit margin. For example, though Walt-Mart’s sales exceeds $400B, its profit margin is just 3.3%. This translates to a cool $13.4B in profits. Despite the low-profit margin, Walt-Mart is one of the top companies in the world and the stock is owned by millions of investors.
These companies draw their profits from a global customer base. They are not dependent on the economic growth in any one local area or nation or even a continent for that matter. They are international, their market base includes every man, woman and child on the globe. You money is safe in these companies and you have the benefit of world exposure.