Stock Investment In Emerging Markets: A Comprehensive Guide

The early 2000s marked the onset of a trend which invited investors to open trading account in emerging markets, which means the growing economies of countries that are in the transition phase from developing to developed nations. There is substantial economic growth and immense volatility in these markets. When investors are hunting down such markets, they need to ensure that there is a minimum political upheaval and social unrest. The current emerging markets are the BRIC nations, which include Brazil, Russia, India, and China.

However, the progress of these nations is not always on an upward trajectory. There are unprecedented situations causing climate and political unrest. Therefore, necessary caution must be exercised to cache the enormous rewards generated from emerging markets, which have the biggest growth potential and high-return stocks. After we decide on the type of investment, we must know what are the factors that we should consider before we buy shares online or from emerging markets. Let us unravel some of those factors in the following pointers:

  1. Stocks- international stocks of these countries are available in the international market. Suppose you, with a demat account, want to invest in overseas stocks; there is a specific investment instrument known as an Indian depository receipt (IDR). It functions very much like an equity share, but with a little difference, and Indian investors who want to earn long-term rewards from foreign stocks can do so by buying these IDRs. It allows the opportunity for foreign companies to raise capital through the Indian securities market as they can’t be listed in the Indian stock exchanges.
  1. Bonds – investing in bonds of companies from emerging economies poses challenges and might involve the supervision of experts. Still, once done right, it can profit significantly. Investing in bonds with zero brokerage account using online trading platforms makes you the creditor, and you receive fixed payments from the government or corporation that issues the bonds until they reach maturity because, after that, your principal is paid back to you.
  1. Mutual funds and ETFs- mutual fund investment and diversification go hand in hand. All stock market enthusiasts know the fact that mutual funds offer a basket of securities that is scattered into several domains. So, the risk quotient is considerably low compared to individual stocks and bonds. For Indian investors, there are some international mutual fund schemes available, such as Franklin India Feeder Franklin US Opportunities Fund, ICICI Prudential US Bluechip Equity Fund, and The Edelweiss Greater China Off-shore Fund. There can be specific countries or segments of stocks that we can consider for investment, such as small-cap, large-cap stocks or dividend stocks of the emerging markets.
  1. Real estate investment trust (REIT)- another promising investment from the emerging economies would be to put your money in the return-generating lands because investing in real estate-focused mutual funds and ETFs is generally considered a high-yield investment. Especially in the emerging markets of economically growing nations, investing in real estate could be a great option to consider.

Once you are done researching the viability of investing in emerging markets, it is time to make your move, but before that, you cannot miss to have a close look at the tax repercussions. Whenever you plan to sell any of your investments with the intention of generating profits, you will be susceptible to capital gains taxes unless you own a tax-advantaged account. Investing in international securities implies foreign taxes, and being strategic about all such tax deductions, you should consult a tax expert.