Fisher Investments on Emerging Markets

Foreword

In your hands is the latest in a series of investing guides from Fisher Investments Press—the first ever imprint from a money manager, produced in partnership with John Wiley & Sons. But this guide is a bit different. Whereas the others have focused on analyzing standard investing sectors (Energy, Materials, Consumer Staples, Health Care, Industrials, etc.), this is the first guide on a region.

Why start with emerging markets? After all, the developed world seems risky enough without adding unique emerging market risks—political instability, poor infrastructure, corruption, and obscure regulations. Except that's not really true anymore. Once economic backwaters, emerging markets are increasingly civilized, orderly, booming nations—though individually, risks remain. Over the last 15 years, they've annualized 4.5 percent, accelerating to 5.8 percent in the last five years, while the developed world averaged just 3.0 percent. And, with that growth, their relative importance has grown, too—from 16 percent of total GDP in 1989 to 28 percent in 2009. And their stock markets have boomed—20 years ago they were just 1.4 percent of the world, 10 years ago 4.6 percent. Today, they're 12 percent and growing. You can't get good global exposure without owning some emerging markets now. Ignoring emerging markets means giving up opportunities to enhance performance and manage risk.

But don't be fooled—growth doesn't automatically mean good stock returns. Example: China's economy grew 10.1 ...