Friday was yet another all-time market high and we continue to see good news with other economic indicators. Inflation has begun ticking down, and new unemployment claims are also down for the third consecutive week.
Projections for emerging markets are a bit down, as China has a regulatory crackdown and we see enhanced geopolitical risk in the region.
You may be asking, what are emerging markets? Typically, we divide equities, or stocks, into multiple categories. Remember that a share of stock represents ownership in a company. We divide them by size of company, or market capitalization. That gives us large, mid, and small cap stocks.
We also divide them by the type of company – growth or value. Growth stocks are generally companies that are either not currently profitable or are plowing profits back into the company to grow faster. Value companies are typically paying dividends, or sharing their profits with their shareholders.
And finally, we divide them by location. Domestic equities are stocks of US-owned companies. That doesn’t mean they only have operations in the US. For example, Ford and Toyota both sell cars around the globe. But Ford is a US stock, and Toyota is an international stock. International stocks are generally from fully developed economies. Think Western Europe, Australia, Japan.
This leaves emerging markets. South America, much of Asia, including China and India, are part of this classification. Historically, Emerging Markets Equity has been one of the most volatile asset classes, but also one that can have pretty high returns.
You may ask why we would want such a volatile asset class in our portfolio. In the long term, the returns can be strong. And in a managed portfolio, you rebalance. Meaning that, when one asset class is outperforming, you sell some of it, and buy the asset classes that aren’t performing so well. Rebalancing a portfolio means you are regularly selling high and buying low.
Your action to take this week is to sign up for our Financial Foundations class. You can register on our website at covingtonalsina.com. Be sure to check out our Facebook page for more information.
Securities offered through LPL Financial, Member FINRA/SIPC. Investment advice offered through Great Valley Advisor Group, a Registered Investment Advisor. CovingtonAlsina and Great Valley Advisor Group are separate entities from LPL Financial.
All performance referenced is historical and is no guarantee of future results. All indices are unmanaged and may not be invested into directly.
Companies mentioned are for informational purposes only. It should not be considered a solicitation for the purchase or sale of the securities. Any investment should be consistent with your objectives, time frame and risk tolerance.
The opinions voiced in this show are for general information only and are not intended to provide specific advice or recommendations for any individual. To determine which strategies or investment(s) may be appropriate for you, contact the appropriate qualified professional prior to making a decision.