The Fear 😰 Of Investing In Emerging Markets Will Kill Your Opportunities!
Background
The way US stocks have behaved recently should not come as a surprise as equity markets behaves exactly the same way 📉. People usually forget that these movements are normal and can happen any time for a long period of time. It has to be noted that the S&P500 did not give any positive returns for almost 14 years from 2000 until 2014! Can someone guarantee that it cannot happen again? NO❗️
Moreover, during the 2000s the world has not seen the inflation, crazy money printing, commodities super cycle, pandemic 🦠 and what not which is happening across the globe nowadays. Even today, after experiencing such catastrophic economic meltdown, governments of developed countries like Canada still handing out free money to citizens in the name of support. What they don’t understand is that by handing out such money, they are only fueling fire 🧨 to inflation.
The Misconception
I am not an expert in macro economics – but I try to read between the lines as an avid enthusiast for personal finance and try educating 📖 the masses on the situation based on my learning. The chart of 14 years of flat S&P500 should trigger anyone including Pakistanis living abroad and residents alike who fancy US stocks all the time which is not wrong at all for diversity purposes – but ignoring Pakistan for fear mongering will only hurt those in missed opportunities.
Below is the trend 💹 for KSE100 index during same time where you can see the exponential rise of 1,160% in 14 years and if you adjust the chart for dollar, it would still give you a return of at least 700% in 14 years. [Mention in the comments once you calculate the CAGR on this]
Now, there is no denying that from 2017 until now the index based dollarized returns in KSE100 are actually negative – which is always reported in the media too. However, if you invest long term applying your brain, eliminating the gambling element while prioritizing the cash flow and keep reinvesting dividend if any, you will still get returns that beats inflation big time and will make you happy 😍.
My Investment Strategy
Prior to 2018, I had a conventional approach towards investing concentrating into property as with any other South Asian expat 👨💼working in the gulf. However, things changed once I got the flavor of stocks / mutual funds and when I studied the trends over long term. I discussed such trends here in these videos 📺 here: This & this. I also have discussed the best dividend paying stocks selection criteria in this video here for Pakistan.
People undermining Pakistan should know the power of emerging market regardless of the depreciating currency. Those who have the liberty and luxury to invest outside Pakistan should go ahead and invest as part of diversification – but those who willingly refrain from investing in Pakistan out of fear should rethink the strategy – you will really miss out the rally 🏃♂️ as and when it happens.
VWO – Vanguard emerging market ETF’s last 1 month returns = -3.98%
S&P500 Index last 1 month return = -11.2%
I myself have recently started investing in the US stocks as discussed here, and to tell you the truth the Apple stocks that I purchased are in RED (-12.69%) because of recent selloff, however, the account I created for auto invest with SARWA is down by (-7.9%) [here the emerging market component saved the steep fall]. This also shows how investing in individual stocks can backfire compared to investing through a basket – however, I am committed here on very long term with both SARWA invest and Apple stocks because of the believe in my strategy.
💡 For GCC residents: Invest in SARWA with this link and get $50 as referral bonus once you fund your new SARWA account: ✅ https://bit.ly/Sarwa-Wali
Keeping history in mind, there might be years when the stock market will not perform – which can even stretch for more than a decade! With that said, following are basic principals of personal finance I follow without fail:
- Always invest in long term – Don’t try to time the market.
- Always stay invested – Time in the market is important
- Try to invest in assets providing cashflows
- Extra cash to be reinvested for the purpose of compounding.
- Keep a balanced portfolio of value and growth stocks [I prefer dividend paying value stocks more then growth]
- Try your best to keep real estate in your portfolio of wealth regardless of where you are from.
- As with all equity investments, try not to take too much of exposure near your retirement years.
- Last but not the least, dont negate emerging markets. Invest in these directly (like PSX) or through ETFs like VWO.
About Myself
I post 3 videos every week on my YouTube channel on the topics of productivity & personal finance specifically for expats & in general for wider Pakistani community. Besides this, I update this website / blog on weekly basis so do visit regularly for updates – To get value out of the content, please consider subscribing both the YouTube channel and the newsletter.
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Greetings! I am a huge fan of yours , and I follow and watch your videos , thank you so much for all the good work and the inspiration ( I love your name )
Thanks a lot for kind words 🙂
Thanks for the kind words 🙂
Great analysis. Can you please share the Dividend paying Stock in Pakistan or foreign markets.
Regards
From KSA
Thanks for the comment. I made few videos on dividend paying stocks – are you following the YouTube channel?