Investment adventures in emerging markets

Mark Mobius gives his advice about the best time to invest

Mark Mobius gives his advice on the best time to invest
Investment Adventures in Emerging Markets

After conducting some historical market studies, I found two important emerging stock market trends.

Historically, bull markets have gone up more, in percentage terms, than bear markets have gone down, and bull markets have lasted longer than bear markets.

So, if one systematically invested the same amount each month or each quarter over a number of years, one would have found that over the long term they were in a bull market more than in a bear market.

Historical studies show that, in percentage terms, the bull markets have grown more than the bear markets have declined.

If one has the discipline to continue adding funds during those bear market cycles, that same amount of money would’ve bought more stocks.

Investing essentially comes down to taking the long-term view and diversifying.

Investing during a bear market requires you to look beyond the immediate bad news and toward a potential future recovery.

Avoid being swayed by friends and family who have given up on their stock market investments and try to think ahead.

 If the newspapers are reporting how dire the market is and how it will get worse, you can also become subject to what we call the “whipsaw” effect – buying and selling at the wrong times.

This is what happened when many sold in a panic at the bottom of the market during the US subprime crisis in late 2008 and early 2009.

Without a long-term view you just are not likely to be able to have the discipline to continue investing in a bear market and wait for the potential upturn.

 So if you have money to invest, and are taking a long-term view and thus not hung up on timing the market, how and where do you invest it?

Another simple answer: diversify.

Most of us do not have the capability or time to constantly monitor companies, and even professional investors realise that if they are not actually controlling the company in which they invest, some unknown or unexpected event can wipe them out.

While diversification doesn’t guarantee a profit or protect against loss, it can potentially help mitigate some volatility.

 I think it’s important to be diversified not only across different companies, but also across different industries and, most importantly, across different countries.

One reason why professionally managed strategies are so popular globally is because they enable investors to be well diversified and have a variety of stocks that they probably could not properly research and invest in themselves.

Unfortunately, many investors  have portfolios that invest in only one country… their own.

I see this as a big mistake because they are missing out on potential opportunities all over the globe. 

Our research showed that in the 25 years we studied from 1988 – 2012, and of the 72 stock markets in the world we examined, not a single market that was the best performing for two consecutive years.

Only one market was the best performing in four of those 25 years; Turkey.

Only two markets were the best performing for two years; Russia and Argentina.

Of the remaining 69 countries, only 16 countries had one year as being the best performing as shown in the table below.

The rest of the 53 countries had not even one year of being the best performing.

It is interesting to note that China and the United States are not on the list.

This reminds me of another truism of successful investing; being different.

If you invest where everyone else feels comfortable, you may not be investing in the right place.

In investing, we believe sometimes being unpopular can be the key to success, and the right time to invest can be any time at all.

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