Emerging Markets: Diversifying Asset or a Reverse Lottery? (EP.191)

There seem to be many differing opinions out there about investing in emerging markets, and unfortunately, many of these are inaccurate. This is mostly due to the fact that emerging markets and your involvement in them, perform in ways that are somewhat counterintuitive. In today's episode, we tackle this tricky subject from a number of angles and try to give all of our listeners a better understanding of the strengths and weaknesses of using emerging markets within your portfolio, without falling prey to some common traps. To kick off the episode we talk about some financial news and the interesting recent book Making Numbers Count, before diving into the main course of the show. Listeners can expect to come away with some new insight into the history of emerging markets theory, realistic emerging markets returns, the appropriate amount of caution to exercise when investing in them, and more. Towards the tail end of the show, we are joined by our friend Morgan Housel, author of the prominent new book, The Psychology of Money, and we briefly discuss reading habits and how implementing a few small practices for learning can have an extraordinary impact on ones' life. Don't miss out on this great show.

 

Key Points From This Episode:

 

• Rounding up some interesting recent content; TV shows, articles, and more. [0:01:16]
• This week's book review of about the powerful, Making Numbers Count. [0:07:23]
• Standout data points; Twitter's valuation, Deere Corp, and more. [0:13:14]
• A few pieces of the most interesting financial news from the last week. [0:16:18]
• The roots of the idea of emerging markets and its appearance in the 1980s. [0:20:05]
• Unpacking the findings on emerging markets and the best examples of the thesis. [0:21:20]
• What to expect with regards to returns from emerging markets. [0:26:37]
• Reasons for the benefits of diversifying a portfolio using emerging markets. [0:29:26]
• The importance of market integration segmentation and how this relates to emerging markets. [0:33:46]
• Portfolio skewness and how assets contribute to this. [0:35:18]
• Reasons for surprising yields with emerging markets for Canadian investors. [0:41:26]
• The cautious place that emerging markets deserve in a balanced portfolio. [0:47:20]
• The dangers of mixing and matching products relating to emerging markets. [0:49:45]
• Morgan's opinion on how reading can take us beyond our mundane bubble. [0:51:38]
• The approach that Morgan uses to gain and learn the most from what he reads. [0:52:47]
• Decisions on what to start reading and exploring a variety of your interests. [0:54:03]
• Weighing the value of conversations and discussions about the books we have read. [0:57:32]
• Morgan's process for capturing and retaining useful information from books. [0:58:35]
• Parting advice from Morgan about finding the time for a healthy reading habit. [1:00:11]