The economic landscape affords plenty of opportunity for sound investments, depending largely on an investor’s tolerance for risk. Depending on how your risk tolerance reads, you’ll likely want to target your investments in one of three markets, though your personal financial advisor at Chatterton & Associates will likely encourage you to explore more than one economic frontier. Currently, the global economy is organized according to a three-tiered market structure. Within each, you’ll find reasons to invest corresponding with associated risks.
Take a look at the following breakdown of each market -- developed, emerging, and frontier -- in order to assess where you might manage the best balance between risk and reward. Of course, when you’re ready to make a move and start allocating your earnings to a sharp investment strategy, our team is standing by to advise you and manage your portfolio.
3 Frontiers for Investment Exploration
Choosing where to invest requires the careful assessment of risk versus potential reward. These three market environments represent a significant range, with respect to the risk required in order to reap the reward.
As the name implies, developed markets are those that have a strong democratic market economy, supported by demonstrated stability, making them very attractive to investors. At this point in time, there are 33 nations listed as developed markets according to the Organization for Economic Cooperation and Development (OECD). Most of these countries are located in North America and Europe, with a few found in Asia.
Given their established status, developed markets are often tasked with guiding developing markets and strengthening the global economy, which brings us to the second tier.
Investors can identify emerging markets as ones that are growing, often quite rapidly. For the most part, emerging markets are characterized by stable political structures, burgeoning infrastructure systems, and a significant workforce. The key here is the market’s ability to export goods and participate in international trade. Another mark of an emerging market is its accessibility to foreign investors.
The BRICS -- Brazil, Russia, India, China, South Africa -- nations consistently invite commentary from financial industry experts, given their designation as ever-evolving emerging markets. Other emerging markets include Chile, Colombia, Morocco, and the Philippines, to name a few.
Emerging markets also invite foreign investment, but, owing to their volatile nature, these investments pose greater risk, though the reward can be considerable.
The greatest risk factor, however, is presented by the third tier: frontier markets.
If you think of an emerging market like an umbrella, a frontier market shelters neatly beneath it. Frontier markets are just beginning to grow and present whopping potential for profit by investors, but also pose the highest risk. Depending on how much risk you can stomach, investing in a frontier market could yield record returns.
Nations like Argentina, Bulgaria, Kenya, and Kuwait are examples of frontier markets eager for foreign investors.
The important thing to remember about all three markets is that they are not fixed designations. Depending on political and social-economic circumstances and events, markets can move up or down these three tiers, presenting a consistent challenge with respect to investment strategies.
Lessen the overall risk of your portfolio with Chatterton & Associates
It’s best to explore this shifting terrain with a trusted guide. At Chatterton & Associates, we possess the knowledge to provide the necessary direction in defense of your optimal investment portfolio.
Contact the team at Chatterton & Associates to access one of the top financial advisors in your area.