Brazilian stocks have been laggards so far this year. Compared with the S&P 500′s rise of 14.0% as of May 7, the Bovespa is down 7.7%. Investors’ attraction towards Brazil has waned in the past few years mainly due to political reasons. As an emerging market with plenty of growth potential Brazilian stocks look attractive at current levels. While mining and commodity-based stocks can be avoided other sectors such as construction, financial services, retail, consumer goods, etc. can be considered for investment. A recent article in The Wall Street Journal noted the positive views of some investors on Brazil. From the article:

Shares of the 64 companies that compose the Ibovespa index are trading at roughly 11 times earnings, compared with a price/earnings ratio of about nine at the start of 2012.

Some investors point out that the poor performance of Brazil’s main stock index masks healthy

The Australian stock market has performed well so far this year. The benchmark S&P/ASX All Ordinaries Index is up 5.77% on a price basis and 9.67% on a total return basis YTD. Due to the fall in commodity prices, the index has not regained the level reached before the global financial crisis. However, the long-term return of the index since is pretty impressive as shown in the chart below:

Click to enlarge

(click to enlarge)

Source: Yahoo Finance

The Australian economy is a resource-based economy similar to Canadian and South African economies. The country is called the "The Lucky Country" for the weather, lifestyle and history, it can also be said that the country is lucky due to the vast amount of natural resources available that can be exploited. For example, some of the major commodity exports of Australia are: coal, iron ore, gold, meat, wool, alumina and wheat.

Diversification is an important strategy to follow when investing in equity markets. It is especially important for retail investors who can least afford to lose hard-earned money. To be sure even professional money managers who run other people's money for a living use diversification to reduce risks. For example, many equity mutual fund managers hold 50 or even 100+ stocks in their fund portfolios to take advantage of diversification. However whether diversification can be only be achieved by holding that many stocks is beyond the scope of this article. In general, it is a wise idea to diversify one's portfolio across sectors, countries, asset classes, etc. This is especially important for long-term investors who monitor their holdings but do not trade often based on the gyrations of the market.

In order to fully gain the benefits of diversification it is important to hold a mixture of stocks and bonds of

Japanese stocks have had an incredible run so far this year. The benchmark Nikkei 225 index is up 32.7% as May 1. Compared with this, only a few of the developed indices are up by double-digit percentages. The year-to-date performance of major developed indices as of May 1, are listed below:

• DAX: 4.0%
• FTSE 100: 9.4%
• CAC-40: 5.9%
• S&P 500: 11.0%
• Dow Jones Industrial Average: 12.2%
• IBEX 35: 3.1%
• Swiss Market: 15.9%

Note: Except the U.S. and UK markets, the rest of the markets were closed on May 1, for the Labor Day holiday.

I wrote an article about investing in Japanese stocks back in January. Since that time the Nikkei has surged to outperform the U.S. indices.

The chart below shows the two-year performance of Nikkei against the S&P 500 and Dow Jones indices:

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(click to enlarge)

Source: Yahoo Finance

A significant portion of the

On Jan. 27 of this year I wrote an article discussing the stock split of Brazilian water and sewage services utility Companhia de Saneamento Basico do Estado de Sao Paulo, also known as SABESP (SBS). After an incredible run in 2012, the stock was split 2-for-1 on Jan. 24. After the split, SBS opened at $44.31 on that day and closed at $44.62.

Since the split in January, the stock has mostly remained

The German economy recovered quickly from the Global Financial Crisis (GFC) and continues to remain strong despite the ongoing fiscal crises in other parts of Europe. The largest economy in Europe is also highly export-oriented. Hence, many German companies-- especially the larger ones-- depend more on overseas markets than their domestic and European markets. Even the smaller Mittelstand firms focus on exports and hold leadership positions in the making of industrial components that they supply to the larger firms.

Germany exports about 40% of its goods to Europe and the rest to other parts of the world. Currently the unemployment rate remains at a 20-year low of 6.8% and is projected to fall to 6.6% next year. Exports are projected to rise by 1.6% this year but increase to 5.0% next year. The overall economy will grow by just 0.5% this year per the German government according to a Reuters

For many years now Europe has been hit by one crisis after another. First came the fiscal crisis in Greece and then Portugal followed suit. Greece has been bailed out multiple times so far and is still struggling to recover. In general, the economies of the PIIGS countries have suffered greatly since the global financial crisis of 2008-2009. More recently the tiny island state of Cyprus triggered a new crisis and was bailed out. Up until the crisis, hardly any investor paid attention to, let alone worry about this island causing a global economic collapse.

However despite the seemingly never-ending crises, European stocks have climbed higher in the past few years. The following shows the performance of the MSCI Europe index since September 2009. This index is a measure of the developed economies of Europe including the U.K.

Eurozone crisis: more than three years of pain

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Source:

Gold futures closed at $1,406.50 an ounce in New York Friday. Recently, gold prices plunged by over $200 in just two days before recovering slightly. Over the past 10 years, gold soared from about $330.00 an ounce to a record high of $1900.00 in 2011.

Source: Kitco

From 2002 through early March this year, gold was one of the best performing asset classes, climbing nearly 500% according to a report by CIBC World Markets.

But why did gold prices rise to astonishing levels in the past decade? The authors of the CIBC report noted two reasons for investors' attraction towards the yellow metal:

1. Concerns about inflation and

2. Currency depreciation

Fears about soaring inflation globally has been unfounded. CPI Inflation has declined in the U.S. and other developed countries as shown in the chart below. Though inflation has been rising in the emerging markets, especially the BRIC countries, at the

Banks in Cyprus opened Friday after being closed for 12 days due to the ongoing crisis. The most anticipated event of the crisis – namely a good old-fashioned bank run – did not occur. Instead it appears that this Cyprus drama will drag for a few months.

The tiny island of Cyprus was thrown in the international spotlight a few days ago. Up until that moment investors and everyone else were focused on PIIGS for many months. Indeed the poorest country in Europe but known for being the birthplace of democracy, Greece dominated the media for years in a row requiring multiple bailouts and is still struggling to get its act together. Portugal and Spain faded off with their crises solved one way or another. Italy has been in the news recently as it is still trying to put its political and fiscal situation back in order.

Similar to

China is a net creditor nation and the U.S. is a the world’s largest net debtor nation. The Chinese are the largest holders of U.S. Treasury securities with total holdings exceeding $1.2 Trillion as of January this year. Every year the U.S pays billions of dollars as interest for this debt to China.

According to an article by Visiting Professor John Ross of Antai College of Economics and Management, Jiao Tong University, Shanghai states that China’s financial strength is unparalleled. From the article:

To grasp the underlying dynamic of the global financial industry it should be grasped that it is a mistake to understand the strength of China’s economy by statistics such as that China produces as much steel as the next 38 countries combined, more cement than the rest of the world put together, that it is the world’s largest market for TVs, refrigerators, mobile phones, cars,

Emerging markets have been laggards this year. Among the BRICs, Brazilian stocks have also not fared well either, due to state intervention in businesses and sluggish economic growth in the past few years.

From an article in the Financial Times yesterday:

Gross domestic product grew less than 1 per cent last year, the lowest of the Brics club of emerging nations. Investors are shunning Brazil in preference for Mexico, something unthinkable only two years ago. Although she is still immensely popular, the economy is a potential cloud over Ms Rousseff’s re-election prospects next year.

Her government’s response has been to wade into sectors ranging from energy to telecommunications with a mixture of carrot and stick, from tax incentives to measures forcing producers to cut prices. Yet rising government involvement in business is proving divisive. On one side, those in banking and the financial markets argue that Brazil is reverting

Commodity prices including those of precious metals tend to go through super-cycles. Booms and busts occur as a result of these cycles. These cycles last for many years.

In the latest super-cycle gold prices have climbed consistently in the last decade up until 2011 when prices reached a peak of just over $1,900.00. Since then prices have been volatile. On Friday it closed at $1,609.20 in New York.

10-year gold price chart:

Source: Kitco

The following chart shows real gold and silver prices from 1850 to 2012:

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The tables below show the dates

Mexico's economy boomed when the country signed the North American Free Trade Agreement (NAFTA) nearly two decades ago. The manufacturing sector especially thrived as U.S. firms shifted their operations to Mexico to take advantage of the cheap labor costs. As a result, Mexico's share of U.S. manufactured goods import rose from slightly about 4% in 1994 to about 13% in 2001, according to a report in the latest issue of IMF's Finance & Development magazine.

Then the party almost came to a halt when communist China joined the World Trade Organization (WTO) in 2001. China's entry into the WTO gave the country a strong edge over over Mexico since China could freely export its goods to the U.S. without any import restrictions. Hence China's goods exports to the U.S. rose significantly while Mexico's exports suffered.

From the report:

Between 2001 and 2005, Chinese manufacturing exports to the United States

Frontier markets are the wild west of the investing universe. These markets include countries like Côte d’Ivoire, Kazakhstan, Bangladesh, Nigeria, Qatar, Tunisia, etc. The equity markets in some of these countries have performed well in recent years, which is attracting investors' attention. In a recent article, I discussed these markets and suggested that investors should not into dive into them now.

Investing in frontier markets is not for the faint-hearted due to many risks -- including political, economic, currency, lack of transparency, etc. Many of these countries will remain as frontier markets for the foreseeable future. While a few of these markets may graduate to emerging market status, most of them will not. Investors' enthusiasm for frontier markets is evident with their rising interest in ETFs for these markets. However, this enthusiasm may be misplaced.

From the article "Are Frontier Markets Ready for Prime Time?" in Bloomberg

The dividend yield of the U.S., Canadian and Australian equity markets as of March 18, 2013 was 2.1%, 3.0% and 4.2% respectively according data provided by The Financial Times. Generally U.S. equities tend to have lower dividend yields than foreign equities.

Recently I came across an article by Jonathan Jacob in Canadian Investment Review in which he discussed about how Canada outperformed the U.S. on dividend stocks. So I wanted to check the performance of U.S. dividend stocks against Canadian and Australian dividend stocks over different periods. In order to do this comparison, I used the MSCI High Dividend Yield indices. This index is composed of high dividend yielding stocks within an MSCI country index.

(Click to enlarge)

Data Source: MSCI

Note: The returns shown in the chart above are total returns and based on U.S. dollars.

Australian income stocks beat U.S. stocks in all the periods shown

Crude oil and natural gas production in the U.S. has strongly rebounded in the past few years according to an article by Thomas Helbling in the latest edition of IMF's Finance & Development magazine. As a result, natural gas prices are at a 20 year low. But gasoline prices have not followed natural gas prices and have actually reached closer to the $4.00/gallon mark in recent weeks. Today, however the average national price is at $3.659 per the gasbuddy.com website.

(click to enlarge)

The IMF article notes that high crude oil prices and new technology have allowed produced producers to cheaply extract these resources from unconventional geological formations. The process of "fracking", in which fluids are injected under high pressure into rock formations such as shale rock to release trapped fuels, has revolutionized oil and gas production at prices that are profitable to producers.

From the article:

Many retail investors are coming to the realization that stock picking is a losing game. The folks that lost all or most of their investments during the dot-com bubble of the 1990s jumped back into the market thinking it was safe, only to take a hit again by the great global financial crisis of 2008-09. At the lows of those dark days some investors sold out their holdings and decided to never again invest in equities. Who could blame them since their trust in the market was shattered not once, but twice within a decade-- and they were shocked to see the bankers and others that created the crisis escaped scot-free. They were disgusted with the regulators such as the SEC who were supposed to monitor the workings of the market but slept at the wheel like a drunk driver, and even when they took any action, they were more

Italy has one of the world's largest economies in the world. Although the country has a rich history and cultural heritage, currently it is going through some tough economic times. Despite the current problems, as a developed country Italy is home to many world-class companies. In this article, let's take a quick look at some of the largest Italian companies. Before we get into that, here are a few facts about Italy:

• Italy had a population of over 61.0 million in 2012.
• Italy has the 11th largest economy in the world with a GDP of about $1.8 trillion (2012 data).
• The northern part of the country is highly developed with many industrial companies, while the South is less developed, agriculture-based, and depends more on government subsidies.
• Unemployment is high in southern Italy compared to the North.
• The economy is composed of many small and medium-sized family-owned companies.
• Italy is a

Investors can the amplify returns of an investment in a stock by reinvesting dividends.This return known as the Total Return will be substantially higher than the Price Return in the long term due to the effect of compounding. The difference in returns between the total return and price return will be especially significant for companies with above-average and growing dividend yields.

While this strategy works with stocks does it work with ETFs?

Since ETFs are similar to stocks in many aspects one can assume that this strategy will work with ETFs also. So in order to verify this assumption I did a quick check of returns using two of the largest ETFs for U.S. stocks. The results show that total returns for ETFs is higher than price returns. Unlike stocks ETFs can have other distributions such as capital gains in addition to dividends. Hence the total return calculated for ETFs

Diversification helps reduce risk and volatility of a portfolio. Some investors falsely assume that diversification eliminates risks altogether. This is not true. Diversification only helps to reduces risk but not eliminate it. For example, a well-diversified portfolio of stocks may fall 15% when the market falls 20% or 25%. In a major market crash such as the one we saw in 2008-09, diversification would have helped a portfolio from a complete wipe-out.

While one type of diversification can be achieved by building a portfolio of various asset classes, further diversification is important and necessary for the equity of the portfolio. Simply putting all the money in one or two stocks-- or even five-- is a recipe for disaster. Depending on the size of a portfolio, one can diversify with 25-50 stocks. Since each stock behaves differently based on sector, earnings and so many other factors, it is a wise idea