How would you like to gain an actual insight into emerging markets and the right investment opportunities? Sounds good, right? Well, read on to find out more. You can also listen to our latest episode of A Dab Of Investment for a comprehensive update on the state of play regarding various emerging markets around the world

Traditionally, emerging markets and the Far East (particularly China) are viewed as high volatility investments. They involve more risks and consequently, this could translate into a bigger reward. But is this always the case?

Imagine having a UK equity-based fund that produces a five per cent return and an overseas fund that offers a seven per cent return. Technically, the latter provides a bigger return, but it involves double the risk to achieve it. So, despite its bigger size, it may not be worth it.

That’s why it’s so important to ensure that your investments are in the right place and worth the risk.

What markets should you avoid?

When it comes to seeking investment opportunities, some emerging markets pose significant risks that are not worth taking. Consequently, you may want to steer clear of them to safeguard your investments. For instance, Argentina recently announced that their inflation rate clocked in at around 102.5 per cent in February. This increase has of course, led to a corresponding rise in prices – a red flag for any investor.

Similarly, the ongoing war in Eastern Europe has caused immense strain and struggle, making it a potentially risky market for investment. Therefore, it’s essential to exercise caution and carefully evaluate the risks before investing in these markets.

China and the dollar

China, the world’s second-largest economy after the US, is a particularly interesting market for investors. With most of its economy built on exports, the COVID-related shutdowns last year significantly impacted its GDP, making it a challenging time for investing in China and its surrounding regions. However, the recent reopening of its export and import markets has eliminated this struggle, putting the country in a position to keep on importing high-value goods.

China’s economy will also get a much-needed boost thanks to the dollar. The US dollar has remained very strong over the last year, partially as a result of the volatility caused by the war in Eastern Europe. As it returns to normal levels, China will be the biggest benefactor as it will be able to export more, at less value.

In general, the consensus from fund managers is that there is a lot of potential in this region. But there’s a catch – the ongoing speculation about China’s intentions towards Taiwan. The jury is still out on whether there will be an invasion, but it’s certainly a factor worth considering when making investment decisions.

The UK

As we’ve shared in previous blogs and podcasts, the UK stock market is perhaps the best place to put your money now, especially with UK equities showing promising signs. There have been several news reports (amidst a host of gloomy predictions on the UK economy) confirming that the stock market is quietly booming to an all-time high. So, if you’re seeking solid investment opportunities, it’s worth speaking to an independent financial adviser about this region.

Final thoughts

At Applewood Independent, we draw on our experience, knowledge, and access to fund managers to make informed choices for our clients’ portfolios. While past performance is important, we base our opinions on the current market conditions and environment. 

As always, speaking with an independent financial adviser before making any investment decisions or building your portfolio remains the gold standard.

If you’d welcome our input, expertise and experience, please get in touch by emailing us at alex@applewoodindependent.co.uk or david@applewoodindependent.co.uk. 

The views expressed in this article are those of the author and do not constitute financial advice. Applewood Independent Ltd is authorised and regulated by the Financial Conduct Authority. For financial advice designed for you and your specific circumstances, please contact the author using the contact details provided in this article or, alternatively, contact the Applewood Independent Ltd office on 01270 626555.

The value of your investment can go down as well as up, and you may not get back the full amount invested.

Past performance is not a guide to future performance.

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