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  • The Best Long Term ETFs and Mutual Funds 0 comments
    Sep 28, 2009 7:38 PM | about stocks: FXI, IFN, IF, VWO
    Do you want the best returns for the long run? Go to where the growth is.
     
    The financial community loves to talk about US stocks having a 7% real return, after it was popularized in Jeremy Seigel'sStocks for the Long Run. This translates to 10-11% return before we take inflation into account. The problem with this is that it examines one very unusual subset of time where a country goes from a small fledgling nation to the largest economic empire on earth.
     
    The dataset used by Seigel essentially uses the last 200 years of stock information, beginning in 1802. At that time, the US had admitted 16 states to the Union, and Thomas Jefferson had not even signed the Louisiana Purchase. During the next century and a half, we expanded across a continent and had only one major war on our home soil. America was the very definition of an emerging market.
     
    We cannot expect the US to grow and innovate on the scale seen in the past. For portfolio growth, emerging markets are the best bet. Look for nations where factories are being built and most of the populace is poor. Industrializing countries where much of the citizenry are rural and looking for opportunity in the cities are where we need to invest. Resource rich nations are also a good bet.
     
    MSCI Barra identifies 22 countries as emerging markets. Some of the countries identified have been growth engines for some time, such as China (NYSEARCA:FXI). Better growth opportunities may exist in countries like India (NYSE:IFN), Colombia, Peru and Indonesia (NYSEMKT:IF). With the exception of India, these countries have been overlooked, and all are growing much faster than the US. So make sure that you have some exposure to these emerging markets, or you will miss out on some of the world's economic growth. The comparison below between the Vanguard Emerging Markets Fund (the ETF symbol is VWO) and the S&P500 shows what a difference high growth countries can make in your portfolio.
     
     
     
     
     
     
     
     
     
     

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