Expert Author Michael Dawson
In October 2003, Goldman Sacks published a research paper titled, "Dreaming with BRICs:. Road to 2050" The newspaper says that Brazil, Russia, India and China, commonly referred to as BRIC, can be counted among the world's most dominant economies by mid-century. By 2041, it would be China's gross domestic product (GDP) may be larger than the United States and larger than all others except Japan in 2016. The BRIC economies together maybe larger than the G6 (U.S., Japan, Britain, Germany, France and Italy) by 2039. Obviously there are implementation risks, but the trends are in place to make this happen.
This has huge implications. As these countries develop, just think how their people will benefit and the opportunities created. Demand for items that developed countries the middle class have come to expect will be enormous. Consumables such as iPods and DVD players will be important, but that will pale in comparison to the demand for homes with indoor plumbing, electricity, basic appliances and cars. At Goldman Sachs follow-up report released in 2004, states that between 2005 and 2015 more than 800 million people in these countries, the annual income of $ 3,000 will have crossed. In 2025, approximately 200 million people in these economies have an annual income above $ 15,000.
So, how can we benefit investors as the industrialization of the BRIC? I would like to propose two approaches: direct and indirect investments in emerging economies. Direct investing requires a thorough knowledge of companies in complex and diverse countries. This is far too time consuming for the average investor. A much simpler approach would be the purchase of single-country exchange traded funds (ETFs). I realize this is a mouthful. Let's start by defining exchange traded fund (ETF). It is a fund that tracks an index, but can be traded like a stock. Thus, it provides the diversification of a mutual fund, but is not bothered by trade cut-off times and early repayment charges. A single-country ETF is linked to the index of a country that the value and composition of the particular exhibition reflects. ETFs of the BRIC countries: Brazil (EWZ), Russia (TRF), India (IFN) and China (FXI). Their year-to-date performance (YTD), as of 2006/06/30, is respectively 17.2%, 27.4%, 16.3% and 24.6%. This provides an equally-weighted return of 21.8%. Beating the American Major indices yield of 4.0%, 1.8% and -1.5% (DOW, respectively, S & P 500 and NASDAQ).
The second approach, investing indirectly, is to invest in companies that materials and equipment that the BRIC countries will have to industrialize deliver. Imagine the number of highways, bridges, railways, factories and skyscrapers will be built. This can not without raw materials such as iron and carbon, which are combined to form steel. Modern society requires copper for electricity and information technology. Can you imagine how much cement and concrete will be consumed? The demand created for these and other raw materials will be phenomenal.
To leverage this approach I created a basket of 12 shares. It includes proven industry leaders that produce or supply to companies that extract base metals from the earth. Base metals are copper, aluminum, nickel (stainless steel and nickel-metal hydride batteries), zinc (anti-corrosive coating in galvanized steel) and Lead (lead-acid batteries). Companies that mine base metals are: diversified producers - BHP Billiton (BHP), Falconbridge (FAL), Rio Tinto (RTP), aluminum producer Alcan (AL), copper producers - Freeport-McMoRan (FCX), Southern Copper (PCU), Phelps Dodge (PD), nickel producer Inco (N), producer of iron ore - Companhia Vale Do Rio Doce (RIO). The suppliers of equipment, components and services to these companies will also benefit. So I have two heavy equipment manufacturers in the portfolio: Caterpillar (CAT) and Bucyrus International (BUCY). The latter company is not a base metal producer or supplier, but countless tons of cement and concrete are needed to build-out will be. Therefore I have included cement and concrete producer - Cemex (CX) in the basket. This indirect approach, using an equally weighted portfolio of the shares mentioned above, the direct approach better than 27.2% versus 21.8% year-to-date.
Finally, I would like to share some of the implementation details with you. The above portfolios are intended to be marketed as a basket which means that all must be bought and sold at the same time. Cherry-picking a few stocks can yield better results - diversification reduces business or country-specific risk. It is also important to choose the right agency to implement this strategy. I have found that FOLIOfn lends itself well to this strategy. It allows full automation of the process by supporting single-order basket trading as well as automatic dollar cost averaging. I recommend combining strategy with dollar cost averaging. For more information about the benefits of dollar cost averaging, see my article on "Double Digit Gains with Dollar Averaging." Commissions on a large basket can be priceless. FOLIOfn address with its various committees plans, including one that allows the window to 600 trades per month for $ 30. Consequently, costs are charges of $ 40K less than 1% per year using this plan. This puts fees basket trading line with the allowances of the ETF and much better than mutual funds.
There is a huge opportunity to invest in the BRIC thesis make money. What are you waiting for?
Reference:
"Dreaming with BRICs:. Road to 2050"
Michael Dawson, founder of Time and Money Group, recently said goodbye to a 20 year career in Engineering, Marketing and Sales for the exciting world of financial freedom. He started the group time and money to help you learn from his travels along the treacherous road to financial freedom. Others Visit the website of the company as he and sharing insights on the various roads, including investments, real estate and small business ownership .... others...
In October 2003, Goldman Sacks published a research paper titled, "Dreaming with BRICs:. Road to 2050" The newspaper says that Brazil, Russia, India and China, commonly referred to as BRIC, can be counted among the world's most dominant economies by mid-century. By 2041, it would be China's gross domestic product (GDP) may be larger than the United States and larger than all others except Japan in 2016. The BRIC economies together maybe larger than the G6 (U.S., Japan, Britain, Germany, France and Italy) by 2039. Obviously there are implementation risks, but the trends are in place to make this happen.
This has huge implications. As these countries develop, just think how their people will benefit and the opportunities created. Demand for items that developed countries the middle class have come to expect will be enormous. Consumables such as iPods and DVD players will be important, but that will pale in comparison to the demand for homes with indoor plumbing, electricity, basic appliances and cars. At Goldman Sachs follow-up report released in 2004, states that between 2005 and 2015 more than 800 million people in these countries, the annual income of $ 3,000 will have crossed. In 2025, approximately 200 million people in these economies have an annual income above $ 15,000.
So, how can we benefit investors as the industrialization of the BRIC? I would like to propose two approaches: direct and indirect investments in emerging economies. Direct investing requires a thorough knowledge of companies in complex and diverse countries. This is far too time consuming for the average investor. A much simpler approach would be the purchase of single-country exchange traded funds (ETFs). I realize this is a mouthful. Let's start by defining exchange traded fund (ETF). It is a fund that tracks an index, but can be traded like a stock. Thus, it provides the diversification of a mutual fund, but is not bothered by trade cut-off times and early repayment charges. A single-country ETF is linked to the index of a country that the value and composition of the particular exhibition reflects. ETFs of the BRIC countries: Brazil (EWZ), Russia (TRF), India (IFN) and China (FXI). Their year-to-date performance (YTD), as of 2006/06/30, is respectively 17.2%, 27.4%, 16.3% and 24.6%. This provides an equally-weighted return of 21.8%. Beating the American Major indices yield of 4.0%, 1.8% and -1.5% (DOW, respectively, S & P 500 and NASDAQ).
The second approach, investing indirectly, is to invest in companies that materials and equipment that the BRIC countries will have to industrialize deliver. Imagine the number of highways, bridges, railways, factories and skyscrapers will be built. This can not without raw materials such as iron and carbon, which are combined to form steel. Modern society requires copper for electricity and information technology. Can you imagine how much cement and concrete will be consumed? The demand created for these and other raw materials will be phenomenal.
To leverage this approach I created a basket of 12 shares. It includes proven industry leaders that produce or supply to companies that extract base metals from the earth. Base metals are copper, aluminum, nickel (stainless steel and nickel-metal hydride batteries), zinc (anti-corrosive coating in galvanized steel) and Lead (lead-acid batteries). Companies that mine base metals are: diversified producers - BHP Billiton (BHP), Falconbridge (FAL), Rio Tinto (RTP), aluminum producer Alcan (AL), copper producers - Freeport-McMoRan (FCX), Southern Copper (PCU), Phelps Dodge (PD), nickel producer Inco (N), producer of iron ore - Companhia Vale Do Rio Doce (RIO). The suppliers of equipment, components and services to these companies will also benefit. So I have two heavy equipment manufacturers in the portfolio: Caterpillar (CAT) and Bucyrus International (BUCY). The latter company is not a base metal producer or supplier, but countless tons of cement and concrete are needed to build-out will be. Therefore I have included cement and concrete producer - Cemex (CX) in the basket. This indirect approach, using an equally weighted portfolio of the shares mentioned above, the direct approach better than 27.2% versus 21.8% year-to-date.
Finally, I would like to share some of the implementation details with you. The above portfolios are intended to be marketed as a basket which means that all must be bought and sold at the same time. Cherry-picking a few stocks can yield better results - diversification reduces business or country-specific risk. It is also important to choose the right agency to implement this strategy. I have found that FOLIOfn lends itself well to this strategy. It allows full automation of the process by supporting single-order basket trading as well as automatic dollar cost averaging. I recommend combining strategy with dollar cost averaging. For more information about the benefits of dollar cost averaging, see my article on "Double Digit Gains with Dollar Averaging." Commissions on a large basket can be priceless. FOLIOfn address with its various committees plans, including one that allows the window to 600 trades per month for $ 30. Consequently, costs are charges of $ 40K less than 1% per year using this plan. This puts fees basket trading line with the allowances of the ETF and much better than mutual funds.
There is a huge opportunity to invest in the BRIC thesis make money. What are you waiting for?
Reference:
"Dreaming with BRICs:. Road to 2050"
Michael Dawson, founder of Time and Money Group, recently said goodbye to a 20 year career in Engineering, Marketing and Sales for the exciting world of financial freedom. He started the group time and money to help you learn from his travels along the treacherous road to financial freedom. Others Visit the website of the company as he and sharing insights on the various roads, including investments, real estate and small business ownership .... others...
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