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Fisher Investments on Emerging Markets by Austin B. Fraser, Fisher Investments

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Preface

The Fisher Investments On series is designed to provide individual investors, students, and aspiring investment professionals the tools necessary to understand and analyze investment opportunities, primarily for investing in global stocks.

Within the framework of a top-down investment (discussed more in Chapter 5), each guide is an easily accessible primer to economic sectors, regions, or other components of the global stock market. While this guide is specifically on emerging markets, the basic investment methodology is applicable for analyzing any region or even global sector, regardless of the current macroeconomic environment.

Why a top-down method? Vast evidence shows high-level, or macro, investment decisions are ultimately more important portfolio performance drivers than individual stocks. In other words, before picking stocks, investors can benefit greatly by first deciding if stocks are the best investment relative to other assets (like bonds or cash), and then choosing categories of stocks most likely to perform best on a forward-looking basis.

For example, a Technology sector stock picker in 1998 and 1999 probably saw his picks soar as investors cheered the so-called "New Economy." However, from 2000 to 2002, he probably lost his shirt. Was he just smarter in 1998 and 1999? Did his analysis turn bad somehow? Unlikely. What mattered most was stocks in general (and especially US technology stocks) did great in the late 1990s and poorly entering the new century. In ...

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