Where in the world should you invest? The globe is a big place, and faced with dozens of countries to choose from it’s easy to get overwhelmed. Luckily, MoneySense is here to help. We¹ve done the dirty work for you and crunched reams of hard data to come up with the top markets to invest in today.
Because there tends to be a big difference between emerging and developed markets, we decided to evaluate them separately. We first focus on the developed world and then explore emerging markets. But in both cases we evaluate countries (as represented by their country-specific exchange-traded funds, or ETFs) in two ways. First, we look for those that represent good values relative to their fundamentals. These are value markets which appeal primarily to investors with a longer-term outlook and a penchant for lower risk situations. Second, we highlight markets with momentum. Here we seek strong recent return patterns that appeal to action-oriented investors.
The value grade
Value investors like to rummage through the bargain bin for overlooked gems. When it comes to whole countries, value can often be found in slower-growing nations that may be viewed as boring. But this lack of excitement often leads to modest prices which more than make up for a slow growth rate. Indeed, with a sufficient handicap, even the slowest tortoise can beat the fastest hare.
On the fundamental side, we like countries with low price-to-book-value ratios. In the case of country-specific ETFs, this ratio is determined by summing up the current price (market capitalization) of each company in the index and dividing by the sum of each firm¹s net worth (assets less liabilities). We also like to see low price-to-sales ratios, which provide a good secondary check on value. We arrive at our list of top 10 value countries by combining both low price-to-book-value and price-to-sales grades.
The momentum grade
When it comes to momentum, we want go-go markets with strong recent performance trends. The idea is to hitch a ride with the hot money while times are good. But momentum investors must be willing to move on to the next big thing with alacrity. Active traders favour the momentum approach but even buttoned-down academics are coming around to see its merits. Just be warned, the ride can be a wild one.
We rank each market primarily by its most recent six- and 12-month price history. High marks are given to those country-specific ETFs with the best combination of both.
Where you should invest
So what did we come up with? Have a look at our interactive world map (to the left) and you¹ll see the top 10 countries to invest in by value and the top 10 by momentum. For each country we have recommended an exchange-traded fund (ETF) that you can buy to easily tap into that country¹s fortunes. Below you can also browse a table of our top countries and their associated ETFs. In each list, the first six are developed countries, and the remaining four are emerging markets.
There be dragons
When heading out on the high seas of finance, remember that potential dangers abound. Political instability often hits investors hard. Currency fluctuations are also a big worry. You should be sure to take on risks that you can handle.
We like investing internationally but, before heading overseas, make sure you know what you¹re getting into. Investigate the country you¹re interested in, explore its markets, and study the specific investments you want to make. If you¹re an ETF investor you¹d do well to visit the ETF¹s website, read any associated regulatory fillings, and make sure that the investment is a good fit for you and your portfolio.
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