4 Factors You Should Consider Before Investing in Emerging Markets
Emerging markets have been on the path of rapid growth since the early 2000s. These markets are characterized by enormous growth potential that makes them a profitable place to invest in. However, the risks involved in investing in emerging markets are sometimes understated. So, you need to decide if investing in an emerging market is […]
Emerging markets have been on the path of rapid growth since the early 2000s. These markets are characterized by enormous growth potential that makes them a profitable place to invest in. However, the risks involved in investing in emerging markets are sometimes understated. So, you need to decide if investing in an emerging market is the right choice for you. With so many assumptions and estimations, how should investors respond? We’ll look at a few facts in this article and try to help you make an informed decision. We believe now is the time to embrace decision of investing in emerging markets and stay the course. But before landing on the analysis of investing in emerging markets, let’s understand a bit about the characteristics of emerging markets.
Characteristics of Emerging Markets
Characteristic #1: Demanding market and culture
Factors like narrow highways, dust and heat, low budgets, and scarcity of financial resources all place strains on products in the emerging world. Modern consumers are very demanding and expect high value for their scarce cash. Therefore, companies investing in emerging markets cannot compromise with the quality of the products or services they provide. Both products and services have to be adapted to local traditions and culture in the emerging world, which can be very different from those in the developed markets.
Characteristic #2: Rapidly changing markets
The rapidly changing markets is one of the most significant characteristics of emerging markets as they embrace change and technology advancements very frequently. These markets can shift in a year or even in a matter of months like the markets of South Korea, China or India. This also depends on the factors such as traditional business practices and culture, government regulations, and actions of corporates. Improved economic conditions backed by rising incomes keep on changing consumer behavior creating predictable shifts like empowering women. Therefore, investing in emerging markets faces new challenges as well as opportunities.
Characteristic #3: A youthful and growing population
While U.S, Japan, and Europe, are more worried about rapid aging of their populations and their pensions, emerging economies are young. If we compare, only 21 percent of the U.S population is under the age of 14, while in countries like India, Brazil, and Iran this population percentage ranges from 30 percent to 35 percent. More energetic and creative population is expected to provide better growth opportunities for their economy.
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