The Stock Market (Documentary)

This is Third of five part story of Western Finance system. Stock market becomes often Shock Market, find out how. The story narrates the emergence of Joint …

Lately emerging markets have become a buzzword among the international investors for reaping greatest potential rewards which would be impossible if they stayed put in their affluent hinterlands. The term emerging markets (EMs) is a collective reference to the stock markets of the developing nations. IFC (International Finance Corporation) has listed 35 countries as emerging markets.  A question, which overpowers a discerning mind, is why the international investors are looking towards emerging markets for investing their funds instead of established markets like US? Three reasons can be given to answer this question. First, the average total return of EMs has outstripped those of developed markets.  Investable total return index computed by the IFC which measures the total return for each country based on those stock available to foreign investors shows that return on investment in IFC composite of EMs is 61.64 per cent higher than the return on investment in US market over the years. The institutional investors like the corporate pension funds; insurance companies and international mutual funds are looking towards investments in GMs to magnify their earnings.

Secondly the emerging markets provide excellent scope for diversification, as their correlation with the US and other developed markets is often exceptionally low. The EMs has low correlations not only with the developed markets, but also with each other. The fact that EMs (individually and as a group) has low correlations with the developed markets implies that there is an opportunity for diversification for the global investor. Thirdly as the EMs are generally inefficient markets, the opportunity of finding bargain stocks increase for the highly knowledgeable money managers.   It is comparatively easier to beat the markets in the EMs as compared to developed markets. In developed markets more arcane ones with mixed results have supplemented the traditional tools of fundamental and Technical Analysis. The problem may be that such tools are quickly adopted by a large number of players so that they soon become history. In such a situation the investors are attracted by what they consider to be the relatively inefficient markets of developing countries. Perhaps their tools of analysis will yield good results there.

Considered on the risk from EMs are extremely risky when compared with developed markets. Apart from the obvious threats (political instability, insider trading and others), there are a number of possible reasons why these markets are extremely volatile. First they tend to be fairly concentrated; the larger stocks have a high proportion of the overall capitalization. As a result, there are fewer opportunities for diversification, and returns of these stocks dominate overall market return. Second, unlike the developed markets, which tend to have forces that affect diverse sectors of the economy differently, the EMs tend to have a strong market related force that affects all stocks within a market. This widespread effect tends to accelerate volatility. It is a generally accepted fact that investment in unrelated markets reduces the degree of risk.

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The Stock Market Outsider: Becoming a Billionaire: Valuable, Practical Insight

The Stock Market Outsider: Becoming a Billionaire: Valuable, Practical Insight

Are you rich yet?

Hundreds of billions of dollars change hands in the stock market on a daily basis. With this huge amount of money moving around daily, the average investor never becomes rich in the stock market. Why is this?

Average investors do not know how to apply psychology and business acumen to investment decisions. Instead they attempt to mimic the behaviors of successful investors such as Warren Buffett, George Soros, and Carl Icahn in a desperate bid to achieve hal

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Originally posted 2014-11-30 22:03:10. Republished by Blog Post Promoter

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