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Active Retirees : Active Retirees Feb-March 2013
FINANCE CONTAIN EMERGING MARKETS of the world’s oil reserves 90% of the population 80% of forex reserves 70% 50-90% of oil, gas, copper and gold of world exports 40% of the world’s GDP 35% ten years have seen a wild ride, but emerging markets have still returned 16.56 per cent annually. Emerging markets equities also provide diversification and access to the opportunities of rapidly growing economies in countries such as China and India. That growth means they are becoming a bigger part of the globe’s economy. Michael Collins, an investment commentator with Fidelity Worldwide Investments, notes that emerging markets contain 90 per cent of the world’s oil reserves, 80 per cent of the population, 70 per cent of forex reserves, 50 to 90 per cent oil, gas, copper and gold, 40 per cent of world exports, and 35 per cent of the world’s GDP. So it may be wise for investors to try to gain exposure to emerging equities. How to break in Many investors already have exposure to emerging markets without realising it. If they have invested in international funds that are benchmarked to the likes of the MSCI ACWI (All Country World Index), then their fund will be invested in emerging markets stocks. There are other options, including buying exchange traded funds (ETFs that track indexes), managed funds and buying emerging markets stocks 38 | www.probussouthpacific.org directly, but the latter may not be the best option for most investors. Sweeney points to currency risk and lack of liquidity (the ability to get in and out of stocks easily) as reasons to avoid direct investment. “In some of those markets, broking costs also are pretty high,” he adds. Weigh it up There is disagreement over how the risks weigh up against the potential rewards for retirees. Emerging markets equities provide diversification and access to the huge opportunities of rapidly growing economies in countries such as China and India. Sweeney says professional managers have a chance of what’s dubbed ‘generating alpha’ – being able to generate returns above the index – and Lonsec has ‘highly WChina and Russia are among emerging market top picks, with the Wall Street Journal reporting in December 2012 that the Russian rouble had an extra boost against the USD from an oil price increase.
Active Retirees Dec-Jan 2013
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