{"id":4271,"date":"2014-07-03T06:00:16","date_gmt":"2014-07-03T13:00:16","guid":{"rendered":"http:\/\/staging-prblog.paladinregistry.com\/blog\/?p=4271"},"modified":"2024-08-12T07:58:27","modified_gmt":"2024-08-12T11:58:27","slug":"emerging-markets-exposure-direct-indirect","status":"publish","type":"post","link":"https:\/\/www.paladinregistry.com\/blog\/investing\/emerging-markets-exposure-direct-indirect\/","title":{"rendered":"Emerging Markets Exposure &#8211; Direct vs Indirect"},"content":{"rendered":"<p><em><a href=\"https:\/\/www.paladinregistry.com\/blog\/wp-content\/uploads\/2014\/06\/emerging-markets-stock-purchase.jpg\"><img loading=\"lazy\" decoding=\"async\" width=\"300\" height=\"174\" class=\"alignleft size-medium wp-image-4279\" src=\"https:\/\/www.paladinregistry.com\/blog\/wp-content\/uploads\/2014\/06\/emerging-markets-stock-purchase-300x174.jpg\" alt=\"emerging markets stock purchase\" srcset=\"https:\/\/www.paladinregistry.com\/blog\/wp-content\/uploads\/2014\/06\/emerging-markets-stock-purchase-300x174.jpg 300w, https:\/\/www.paladinregistry.com\/blog\/wp-content\/uploads\/2014\/06\/emerging-markets-stock-purchase.jpg 620w\" sizes=\"(max-width: 300px) 100vw, 300px\" \/><\/a>This article is Part 2 of a 3 part series on Emerging Markets Exposure: Where &amp; How Much?<\/em><\/p>\n<p><em>\u00a0<\/em>We have two ways to gain emerging markets exposure in the portfolio:<\/p>\n<ul>\n<li><strong>Direct Exposure<\/strong> &#8211; we can purchase individual stocks by country (China, Brazil, India) or region (an ETF)<\/li>\n<li><strong>Indirect Exposure<\/strong> &#8211; a well-diversified position can be achieved through U.S. multinational companies<\/li>\n<\/ul>\n<p>The four factors we discussed (<em>see<\/em> Emerging Markets &#8211; High GDP not equal to High Stock Returns) guide our current decision to have <em><strong>indirect exposure<\/strong><\/em>. Here is our rationale.<\/p>\n<p>1. \u00a0Valuation<\/p>\n<p>The U.S. has tremendous competitive advantages &#8211; property rights, legal protection, resources, infrastructure, educated labor, and entrepreneurial spirit. Therefore the risk premium to invest directly must be adequate. We don\u2019t think it is. Let\u2019s consider forward P\/Es. The U.S. is 15.4. Emerging markets is 10.2. The gap appears promising from a risk-premium standpoint but bear in mind that emerging markets data is highly skewed. While the forward P\/E in China is 9.0, the P\/Es in most other areas are much closer to that of the U.S. (offering little or no risk premium). While China may appear attractive from a valuation standpoint, its high GDP expectations are already \u201cpriced in\u201d to the market. Brazil may appear attractive, but it is highly susceptible to investment outflows should U.S. interest rates rise (see Interest Rates). India now offers little risk premium.<\/p>\n<p>2. \u00a0Growth Surprises<\/p>\n<p>Let\u2019s look at current GDP (source: <a href=\"http:\/\/www.economist.com\/\" target=\"_blank\" rel=\"nofollow noopener\">The Economist<\/a>) for the main emerging markets countries: China (7.7%), India (4.7%), Indonesia (5.7%), Malaysia (5.1%), Singapore (5.5%), South Korea (4.0%), and Brazil (1.9%). We don\u2019t see potential positive growth surprises with any of these countries right now. No one stands out.<\/p>\n<p>3. \u00a0Globalization<\/p>\n<p>There is a lot more foreign and emerging markets exposure in our portfolio than meets the eye. Our current emphasis is on large multinational U.S. companies. As mentioned earlier, these companies average 40% of their earnings from outside the U.S. Consequently, the portfolio will benefit should emerging markets out-perform, albeit indirectly. If we had a current emphasis on smaller U.S. companies, their internationally-based revenues would be less than 20% and we would be less positioned to benefit from a bump in emerging markets. Taking globalization into consideration, we can achieve better emerging markets diversification and portfolio risk control indirectly versus directly.<\/p>\n<p>4. \u00a0Interest Rates<\/p>\n<p>We believe U.S. interest rates will rise by 2015. Coupled with Fed <a href=\"http:\/\/www.investopedia.com\/terms\/t\/tapering.asp\" target=\"_blank\" rel=\"nofollow noopener\">tapering<\/a>, this could trigger an outflow of investment capital from emerging markets. We are better protected with indirect emerging markets exposure.<\/p>\n<p><em>To learn more about Dan Laimon, view his <a href=\"http:\/\/www.paladinregistry.com\/financial-advisor\/san-diego-california\/Dan.Laimon\" target=\"_blank\" rel=\"noopener\">Paladin Registry profile<\/a>.<\/em><\/p>\n","protected":false},"excerpt":{"rendered":"<p>This article is Part 2 of a 3 part series on Emerging Markets Exposure: Where &amp; How Much? \u00a0We have two ways to gain emerging markets exposure in the portfolio: Direct Exposure &#8211; we can purchase individual stocks by country (China, Brazil, India) or region (an ETF) Indirect Exposure &#8211; a well-diversified position can be achieved through U.S. multinational companies The four factors we discussed (see Emerging Markets &#8211; High<\/p>\n","protected":false},"author":42,"featured_media":4279,"comment_status":"open","ping_status":"open","sticky":false,"template":"","format":"standard","meta":{"footnotes":""},"categories":[395],"tags":[],"class_list":["post-4271","post","type-post","status-publish","format-standard","has-post-thumbnail","hentry","category-investing"],"yoast_head":"<!-- This site is optimized with the Yoast SEO plugin v23.3 - https:\/\/yoast.com\/wordpress\/plugins\/seo\/ -->\n<title>Emerging Markets Exposure - Direct vs Indirect<\/title>\n<meta name=\"description\" content=\"Two ways to gain emerging markets exposure. Directly purchasing individual stocks by country or Indirectly achieved through U.S. multinational companies.\" \/>\n<meta name=\"robots\" content=\"index, follow, max-snippet:-1, max-image-preview:large, max-video-preview:-1\" \/>\n<link rel=\"canonical\" href=\"https:\/\/www.paladinregistry.com\/blog\/investing\/emerging-markets-exposure-direct-indirect\/\" \/>\n<meta property=\"og:locale\" content=\"en_US\" \/>\n<meta property=\"og:type\" content=\"article\" \/>\n<meta property=\"og:title\" content=\"Emerging Markets Exposure - Direct vs Indirect\" \/>\n<meta property=\"og:description\" content=\"Two ways to gain emerging markets exposure. Directly purchasing individual stocks by country or Indirectly achieved through U.S. multinational companies.\" \/>\n<meta property=\"og:url\" content=\"https:\/\/www.paladinregistry.com\/blog\/investing\/emerging-markets-exposure-direct-indirect\/\" \/>\n<meta property=\"og:site_name\" content=\"Paladin Registry Blog\" \/>\n<meta property=\"article:published_time\" content=\"2014-07-03T13:00:16+00:00\" \/>\n<meta property=\"article:modified_time\" content=\"2024-08-12T11:58:27+00:00\" \/>\n<meta property=\"og:image\" content=\"https:\/\/www.paladinregistry.com\/blog\/wp-content\/uploads\/2014\/06\/emerging-markets-stock-purchase.jpg\" \/>\n\t<meta property=\"og:image:width\" content=\"620\" \/>\n\t<meta property=\"og:image:height\" content=\"360\" \/>\n\t<meta property=\"og:image:type\" content=\"image\/jpeg\" \/>\n<meta name=\"author\" content=\"Dan Laimon\" \/>\n<meta name=\"twitter:card\" content=\"summary_large_image\" \/>\n<meta name=\"twitter:creator\" content=\"@PaladinRegistry\" \/>\n<meta name=\"twitter:site\" content=\"@PaladinRegistry\" \/>\n<meta name=\"twitter:label1\" content=\"Written by\" \/>\n\t<meta name=\"twitter:data1\" content=\"Dan Laimon\" \/>\n\t<meta name=\"twitter:label2\" content=\"Est. reading time\" \/>\n\t<meta name=\"twitter:data2\" content=\"3 minutes\" \/>\n<script type=\"application\/ld+json\" class=\"yoast-schema-graph\">{\"@context\":\"https:\/\/schema.org\",\"@graph\":[{\"@type\":\"WebPage\",\"@id\":\"https:\/\/www.paladinregistry.com\/blog\/investing\/emerging-markets-exposure-direct-indirect\/\",\"url\":\"https:\/\/www.paladinregistry.com\/blog\/investing\/emerging-markets-exposure-direct-indirect\/\",\"name\":\"Emerging Markets Exposure - Direct vs Indirect\",\"isPartOf\":{\"@id\":\"https:\/\/www.paladinregistry.com\/blog\/#website\"},\"primaryImageOfPage\":{\"@id\":\"https:\/\/www.paladinregistry.com\/blog\/investing\/emerging-markets-exposure-direct-indirect\/#primaryimage\"},\"image\":{\"@id\":\"https:\/\/www.paladinregistry.com\/blog\/investing\/emerging-markets-exposure-direct-indirect\/#primaryimage\"},\"thumbnailUrl\":\"https:\/\/www.paladinregistry.com\/blog\/wp-content\/uploads\/2014\/06\/emerging-markets-stock-purchase.jpg\",\"datePublished\":\"2014-07-03T13:00:16+00:00\",\"dateModified\":\"2024-08-12T11:58:27+00:00\",\"author\":{\"@id\":\"https:\/\/www.paladinregistry.com\/blog\/#\/schema\/person\/5daab9a7a45e67cd1436d99b54dd4266\"},\"description\":\"Two ways to gain emerging markets exposure. Directly purchasing individual stocks by country or Indirectly achieved through U.S. multinational companies.\",\"breadcrumb\":{\"@id\":\"https:\/\/www.paladinregistry.com\/blog\/investing\/emerging-markets-exposure-direct-indirect\/#breadcrumb\"},\"inLanguage\":\"en-US\",\"potentialAction\":[{\"@type\":\"ReadAction\",\"target\":[\"https:\/\/www.paladinregistry.com\/blog\/investing\/emerging-markets-exposure-direct-indirect\/\"]}]},{\"@type\":\"ImageObject\",\"inLanguage\":\"en-US\",\"@id\":\"https:\/\/www.paladinregistry.com\/blog\/investing\/emerging-markets-exposure-direct-indirect\/#primaryimage\",\"url\":\"https:\/\/www.paladinregistry.com\/blog\/wp-content\/uploads\/2014\/06\/emerging-markets-stock-purchase.jpg\",\"contentUrl\":\"https:\/\/www.paladinregistry.com\/blog\/wp-content\/uploads\/2014\/06\/emerging-markets-stock-purchase.jpg\",\"width\":620,\"height\":360},{\"@type\":\"BreadcrumbList\",\"@id\":\"https:\/\/www.paladinregistry.com\/blog\/investing\/emerging-markets-exposure-direct-indirect\/#breadcrumb\",\"itemListElement\":[{\"@type\":\"ListItem\",\"position\":1,\"name\":\"Home\",\"item\":\"https:\/\/www.paladinregistry.com\/blog\/\"},{\"@type\":\"ListItem\",\"position\":2,\"name\":\"Investing\",\"item\":\"https:\/\/www.paladinregistry.com\/blog\/category\/investing\/\"},{\"@type\":\"ListItem\",\"position\":3,\"name\":\"Emerging Markets Exposure &#8211; Direct vs Indirect\"}]},{\"@type\":\"WebSite\",\"@id\":\"https:\/\/www.paladinregistry.com\/blog\/#website\",\"url\":\"https:\/\/www.paladinregistry.com\/blog\/\",\"name\":\"Paladin Registry Blog\",\"description\":\"Helping You Make Better Financial Decisions\",\"potentialAction\":[{\"@type\":\"SearchAction\",\"target\":{\"@type\":\"EntryPoint\",\"urlTemplate\":\"https:\/\/www.paladinregistry.com\/blog\/?s={search_term_string}\"},\"query-input\":\"required name=search_term_string\"}],\"inLanguage\":\"en-US\"},{\"@type\":\"Person\",\"@id\":\"https:\/\/www.paladinregistry.com\/blog\/#\/schema\/person\/5daab9a7a45e67cd1436d99b54dd4266\",\"name\":\"Dan Laimon\",\"image\":{\"@type\":\"ImageObject\",\"inLanguage\":\"en-US\",\"@id\":\"https:\/\/www.paladinregistry.com\/blog\/#\/schema\/person\/image\/\",\"url\":\"https:\/\/www.paladinregistry.com\/blog\/wp-content\/uploads\/2014\/06\/Dan-Laimon-e1403222439561-96x96.jpg\",\"contentUrl\":\"https:\/\/www.paladinregistry.com\/blog\/wp-content\/uploads\/2014\/06\/Dan-Laimon-e1403222439561-96x96.jpg\",\"caption\":\"Dan Laimon\"},\"description\":\"Dan Laimon is the Managing Member of TriVant Custom Portfolio Group, LLC, an investment management specialist for individual investors. He has more than two decades of experience in the finance industry. In addition to portfolio management, he held previous positions in foreign exchange, investor relations, stock research and investment banking. He has co-authored an article entitled \u201cMandating the Probability of Success: A New Approach to Retirement Planning\u201d (Journal of Retirement Planning). This article details TriVant\u2019s unique proprietary approach to safe retirement.\",\"sameAs\":[\"http:\/\/www.trivant.com\"],\"url\":\"https:\/\/www.paladinregistry.com\/blog\/author\/dan-laimon\/\"}]}<\/script>\n<!-- \/ Yoast SEO plugin. -->","yoast_head_json":{"title":"Emerging Markets Exposure - Direct vs Indirect","description":"Two ways to gain emerging markets exposure. Directly purchasing individual stocks by country or Indirectly achieved through U.S. multinational companies.","robots":{"index":"index","follow":"follow","max-snippet":"max-snippet:-1","max-image-preview":"max-image-preview:large","max-video-preview":"max-video-preview:-1"},"canonical":"https:\/\/www.paladinregistry.com\/blog\/investing\/emerging-markets-exposure-direct-indirect\/","og_locale":"en_US","og_type":"article","og_title":"Emerging Markets Exposure - Direct vs Indirect","og_description":"Two ways to gain emerging markets exposure. Directly purchasing individual stocks by country or Indirectly achieved through U.S. multinational companies.","og_url":"https:\/\/www.paladinregistry.com\/blog\/investing\/emerging-markets-exposure-direct-indirect\/","og_site_name":"Paladin Registry Blog","article_published_time":"2014-07-03T13:00:16+00:00","article_modified_time":"2024-08-12T11:58:27+00:00","og_image":[{"width":620,"height":360,"url":"https:\/\/www.paladinregistry.com\/blog\/wp-content\/uploads\/2014\/06\/emerging-markets-stock-purchase.jpg","type":"image\/jpeg"}],"author":"Dan Laimon","twitter_card":"summary_large_image","twitter_creator":"@PaladinRegistry","twitter_site":"@PaladinRegistry","twitter_misc":{"Written by":"Dan Laimon","Est. reading time":"3 minutes"},"schema":{"@context":"https:\/\/schema.org","@graph":[{"@type":"WebPage","@id":"https:\/\/www.paladinregistry.com\/blog\/investing\/emerging-markets-exposure-direct-indirect\/","url":"https:\/\/www.paladinregistry.com\/blog\/investing\/emerging-markets-exposure-direct-indirect\/","name":"Emerging Markets Exposure - Direct vs Indirect","isPartOf":{"@id":"https:\/\/www.paladinregistry.com\/blog\/#website"},"primaryImageOfPage":{"@id":"https:\/\/www.paladinregistry.com\/blog\/investing\/emerging-markets-exposure-direct-indirect\/#primaryimage"},"image":{"@id":"https:\/\/www.paladinregistry.com\/blog\/investing\/emerging-markets-exposure-direct-indirect\/#primaryimage"},"thumbnailUrl":"https:\/\/www.paladinregistry.com\/blog\/wp-content\/uploads\/2014\/06\/emerging-markets-stock-purchase.jpg","datePublished":"2014-07-03T13:00:16+00:00","dateModified":"2024-08-12T11:58:27+00:00","author":{"@id":"https:\/\/www.paladinregistry.com\/blog\/#\/schema\/person\/5daab9a7a45e67cd1436d99b54dd4266"},"description":"Two ways to gain emerging markets exposure. Directly purchasing individual stocks by country or Indirectly achieved through U.S. multinational companies.","breadcrumb":{"@id":"https:\/\/www.paladinregistry.com\/blog\/investing\/emerging-markets-exposure-direct-indirect\/#breadcrumb"},"inLanguage":"en-US","potentialAction":[{"@type":"ReadAction","target":["https:\/\/www.paladinregistry.com\/blog\/investing\/emerging-markets-exposure-direct-indirect\/"]}]},{"@type":"ImageObject","inLanguage":"en-US","@id":"https:\/\/www.paladinregistry.com\/blog\/investing\/emerging-markets-exposure-direct-indirect\/#primaryimage","url":"https:\/\/www.paladinregistry.com\/blog\/wp-content\/uploads\/2014\/06\/emerging-markets-stock-purchase.jpg","contentUrl":"https:\/\/www.paladinregistry.com\/blog\/wp-content\/uploads\/2014\/06\/emerging-markets-stock-purchase.jpg","width":620,"height":360},{"@type":"BreadcrumbList","@id":"https:\/\/www.paladinregistry.com\/blog\/investing\/emerging-markets-exposure-direct-indirect\/#breadcrumb","itemListElement":[{"@type":"ListItem","position":1,"name":"Home","item":"https:\/\/www.paladinregistry.com\/blog\/"},{"@type":"ListItem","position":2,"name":"Investing","item":"https:\/\/www.paladinregistry.com\/blog\/category\/investing\/"},{"@type":"ListItem","position":3,"name":"Emerging Markets Exposure &#8211; Direct vs Indirect"}]},{"@type":"WebSite","@id":"https:\/\/www.paladinregistry.com\/blog\/#website","url":"https:\/\/www.paladinregistry.com\/blog\/","name":"Paladin Registry Blog","description":"Helping You Make Better Financial Decisions","potentialAction":[{"@type":"SearchAction","target":{"@type":"EntryPoint","urlTemplate":"https:\/\/www.paladinregistry.com\/blog\/?s={search_term_string}"},"query-input":"required name=search_term_string"}],"inLanguage":"en-US"},{"@type":"Person","@id":"https:\/\/www.paladinregistry.com\/blog\/#\/schema\/person\/5daab9a7a45e67cd1436d99b54dd4266","name":"Dan Laimon","image":{"@type":"ImageObject","inLanguage":"en-US","@id":"https:\/\/www.paladinregistry.com\/blog\/#\/schema\/person\/image\/","url":"https:\/\/www.paladinregistry.com\/blog\/wp-content\/uploads\/2014\/06\/Dan-Laimon-e1403222439561-96x96.jpg","contentUrl":"https:\/\/www.paladinregistry.com\/blog\/wp-content\/uploads\/2014\/06\/Dan-Laimon-e1403222439561-96x96.jpg","caption":"Dan Laimon"},"description":"Dan Laimon is the Managing Member of TriVant Custom Portfolio Group, LLC, an investment management specialist for individual investors. He has more than two decades of experience in the finance industry. In addition to portfolio management, he held previous positions in foreign exchange, investor relations, stock research and investment banking. He has co-authored an article entitled \u201cMandating the Probability of Success: A New Approach to Retirement Planning\u201d (Journal of Retirement Planning). This article details TriVant\u2019s unique proprietary approach to safe retirement.","sameAs":["http:\/\/www.trivant.com"],"url":"https:\/\/www.paladinregistry.com\/blog\/author\/dan-laimon\/"}]}},"_links":{"self":[{"href":"https:\/\/www.paladinregistry.com\/blog\/wp-json\/wp\/v2\/posts\/4271"}],"collection":[{"href":"https:\/\/www.paladinregistry.com\/blog\/wp-json\/wp\/v2\/posts"}],"about":[{"href":"https:\/\/www.paladinregistry.com\/blog\/wp-json\/wp\/v2\/types\/post"}],"author":[{"embeddable":true,"href":"https:\/\/www.paladinregistry.com\/blog\/wp-json\/wp\/v2\/users\/42"}],"replies":[{"embeddable":true,"href":"https:\/\/www.paladinregistry.com\/blog\/wp-json\/wp\/v2\/comments?post=4271"}],"version-history":[{"count":10,"href":"https:\/\/www.paladinregistry.com\/blog\/wp-json\/wp\/v2\/posts\/4271\/revisions"}],"predecessor-version":[{"id":12687,"href":"https:\/\/www.paladinregistry.com\/blog\/wp-json\/wp\/v2\/posts\/4271\/revisions\/12687"}],"wp:featuredmedia":[{"embeddable":true,"href":"https:\/\/www.paladinregistry.com\/blog\/wp-json\/wp\/v2\/media\/4279"}],"wp:attachment":[{"href":"https:\/\/www.paladinregistry.com\/blog\/wp-json\/wp\/v2\/media?parent=4271"}],"wp:term":[{"taxonomy":"category","embeddable":true,"href":"https:\/\/www.paladinregistry.com\/blog\/wp-json\/wp\/v2\/categories?post=4271"},{"taxonomy":"post_tag","embeddable":true,"href":"https:\/\/www.paladinregistry.com\/blog\/wp-json\/wp\/v2\/tags?post=4271"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}