How the Differences Driving Developed vs. Emerging Markets Impact Your Financial Investment

As an investor, you know that no two markets are alike. When it comes to your portfolio and diversifying where and how to invest your earnings, understanding the differences between domestic and emerging markets, with respect to performance on the world economic stage, is critical. Before you consider investing any of your assets abroad, make sure you recognize how emerging markets overseas are performing now, and acknowledge any expert projections for the future.

Parsing through the differences and attempting to predict how these markets will perform shouldn’t be a solitary endeavor. At Chatterton & Associates, your financial expert sharpens every effort against cutting-edge changes in the market, both anticipated and unexpected. Consider the following key differences between developed vs. emerging markets and contact us when you’re ready to plan your financial investment, accordingly.

The Definitions of Domestic and Emerging Markets

As a resident of the United States, you’re living and working in a developed market, designated as the most well-established and economically evolved. The company we keep includes developed markets found in countries like Australia, Canada, Germany, Japan, New Zealand, and the United Kingdom. In order to be considered a developed market, there must exist regulations, high income levels per capita, considerable market capitalization, and increased levels of liquidity.

On the other side of the coin, emerging markets reflect essentially the opposite of developed markets. When considering investing in an emerging market, expect challenges reflected by less mature capital markets, and lower incomes per capita. Where developed markets have long been established, emerging markets are growing at rapid rates, developing quickly despite economic challenges.

One need only look to the BRICS -- Brazil, Russia, India, China, and South Africa or the PIIGS - - Portugal, Ireland, Italy, Greece, Spain, to observe emerging markets in action.

Beware the Eye of the Beholder

Similar to beauty, the designation of one country as a developed or emerging market is often determined by the classifying institution, like MSCI or FTSE. In some cases, the two disagree on a market’s classification, depending on certain indices.

For example, currently, MSCI labels South Korea an emerging market, while FTSE considers it developed.

The trouble with any gray area relative to market classification is the challenge it poses to financial investment decisions. Typically, investors feel more confident investing in developed vs. emerging markets; however, this is not always a case and certainly made more confusing by disparate designations.

Our financial experts can help you navigate these market nuances and invest with greater confidence. Call and schedule a meeting with your investment consultant at Chatterton & Associates to strategize your financial investment in developed and emerging markets.