A professional puts some of his own money into this developing market – “Really interesting”

Emerging markets offer returns and diversification to the investor, but due to the risks, it is worth playing the long game.

Nordic senior strategy Hertta Alava has long professional experience in developing markets. Before his current job, he managed emerging market equity funds for more than ten years.

In the Market Council, Alava says that he has invested his own money in one important geographical area in particular, namely India, despite its volatility. Oil importing country India’s stock market has taken a hit in recent weeks due to the Iran war.

“Individual developing countries involve more fluctuation risk, but yes, for example, I am constantly saving into the India fund. India is a really interesting market and I believe in it in the long term. Of course, the returns of the last twelve months are not so good.”

Alava emphasizes that it invests in India by spreading it over time on a monthly basis, so there are sometimes “very good places to buy”.

“I believe that there are still enough years left that the India fund will generate income for retirement days quite comfortably.”

In the case of India, growth, which is among the fastest in the world among large economies, supports the profit potential. The growth of the population and the middle class, as well as reforms and digitization, are also in favor of long-term returns for stocks. As an example, he cites the Indian banking sector, where there may be room to develop and grow.

There is diversification benefit from developing markets

According to the senior strategist, the diversification aspect of investing in developing markets is relevant for the investor. For example, China, India and Latin America do not correlate directly with the US techno-driven stock market. Taiwan and Korea, on the other hand, due to their emphasis on technology, follow the development of the Nasdaq more than other developing countries.

The expert also points out that the valuation of the stock market in India may seem higher than other developing markets, because large IT companies and companies from the consumer sector are listed there. They typically have higher valuation coefficients than, for example, raw material companies or banks.

Alava reminds us that when considering valuations, we must remember to compare apples to apples from the point of view of the industries.

He also urges a private investor considering a selection of developing funds to take a closer look at the strategy of each fund.

“Is there an emphasis on, for example, value or growth, or does it take a strong view or are we closer to the index. It is worth looking at what material is available from the fund.”