Understanding Emerging Market Investments

Vogel Consulting is a multi-family office that offers unique service platforms to cater to the specific needs of their clients. Advising on nearly $3 billion of assets, Vogel Consulting continues to take a keen interest in both the domestic and international financial markets. The company carefully examines emerging market equities before making strategic investment decisions and recommendations.

Emerging market investments include equities that are issued by developing economies primarily in U.S. dollar denominations. They offer new investment opportunities, growth potential, and diversification benefits to investors. The growth of investments in emerging countries could offset windfalls in the domestic country.

Members of BRIC countries (i.e., Brazil, Russia, India, and China) are believed to have had substantial economic growth over the last decade. South Korea is another emerging market with a rich economy and a growing number of consumers. On the other hand, countries in the Middle East, Southeast Asia, and Africa are still in the process of developing strong, stable economies.

While emerging markets offer many investment opportunities, investors should also take into consideration the risks associated with foreign investment, including foreign exchange issues, as well as political and economic risks. Returns from bonds and stocks are produced in the local currency and must be converted to domestic currency. Currency fluctuations can cause uncertainties and significantly reduce the value of one's investment. Meanwhile, political instability creates distrust and drives away investors. Poor monetary policies, lack of infrastructure, and a high inflation rate also do not help investors maximize their investments.

Three Differences between Traditional and Alternative Investments

Founded in 1993, Vogel Consulting is a multifamily office that offers an integrated approach to wealth management. The professionals at Vogel Consulting look at alternative investments, including private equity, to drive higher returns, especially for high-net-worth families.

Investing is one of the many ways to generate profit from existing wealth. You can either opt for traditional investments such as cash, bonds, and stocks, or choose alternative investments in commodities, hedge funds, managed funds, and real estate investment trusts. The two types of investment vary significantly in terms of required minimum amounts, fees, liquidity, and return on investment, or ROI. 

- The starting investment in traditional funds is between $500 to $3,000, while alternative investments require a substantial initial amount of $500,000 to $1 million plus fees, including up to 2 percent of the fund’s assets and 20 percent of profits. 

- Cash and bonds are short-term investments, and stocks within mutual funds can be redeemed easily if needed. In contrast, assets like real estate require more time to liquidate. 

- Alternative investments tend to generate higher returns compared to traditional investments, even during a financial crisis. However, alternative investments also carry a higher risk.