 Good day fellow investors, today I'm going to make a case why emerging markets should be an essential part of every well-balanced stock portfolio. I have been discussing gold, precious metals, commodities, copper, zinc, where I'm very bullish and this now emerging markets is also a very very important sector where I look for investments. So you get the notion of the team for perhaps the next few months among other things that we'll talk on this channel, other stocks, other sectors, but I'm going to analyze country-by-country, give you interesting stock picks, why I think some are good, some are bad. Emerging markets are a very very different animal so you have to know them in order to understand and invest properly in them. My PhD was on stock risk on emerging markets so I hope to add as much value as possible to your investment and your investment returns. So let's start immediately and check what happened in the past, what are the fundamentals, what are the economics, what are the macroeconomic trends, what are the demographics, economic growth, what will happen, what we can expect and what is the price we have to pay. I'm going to use emerging market ETFs as an example to get an aggregate view. However I'm completely against ETFs so and I'll explain that in a special video about emerging markets but just to give you an example I'm going to use that now. So let's check how the emerging market ETF did in the last 15 years. You can see a great bull run from 2003 to 2007 where emerging markets increased fivefold. This was due to high expectations of economic growth, economic development, opening of world trades and etc. Then 2007 panic on emerging markets and the emerging market ETF was down 63% during 2009. Recovered but we have seen many corrections, many market corrections and the beer market in 2015 where the emerging market ETF fell again 45%. Since then emerging markets have recovered a bit but they are still 24% below their 2007 peak. So from 2003-2007 euphoria around emerging markets and since then the market has been very careful about investing in emerging markets. They are crazy about SAP 500 but emerging markets are mmm this is because in behavioral finance we call it domestic bias. You prefer to invest in what you know and understand well. The price doesn't matter that much. So where the capital is Wall Street Europe they prefer to put it in the SAP 500. Even Europe prefers to put it in the SAP 500. No matter the valuation. This gives us the opportunity to invest in irrationally priced stocks around the globe because others are not willing to invest there yet. However when there will be euphoria those stocks will shoot up. In the meantime let's look at fundamentals to see what are the earnings yield that we can expect. So let me just quick check on the ETF fundamentals which are aggregate so don't take them as given. There are many many differences in price earnings ratio, price to book values, risks, rewards, currencies. There is a lot to know before investing in an emerging market but this picture will tell us enough. Price earnings ratio in this case without the negative earnings but okay is 14.59. Price to book ratio is 1.64. Standard deviation which is volatility a measure of risk completely wrong but let's check it 16.13. If we compare that to the SAP 500 we can see that the price earnings ratio is 6.6 points higher thus 30% more expensive at least. Price to book ratio is double thus twice as expensive as emerging market stock. Standard deviation is a bit lower because the SAP 500 was very very stable with low volatility but that doesn't mean anything for the value long-term investor. So the fundamentals are already better. Now you would say okay but those are emerging markets of course they have to be priced at the discount. Let me show you the macroeconomic fundamentals and then I hope you will see my point. As I said in 2007 the euphoria was based on huge expected future economic growth. The funny thing is that that happened. That actually happened. You can see here in a chart from the International Monetary Fund how China has been constantly growing above 8% and now will grow for about 6% in the future. Other Asian countries like India, Indonesia, Malaysia will grow at also 5-6% in the future and have been growing around 5% in the past. Commodity exporters those countries that are dependent on oil metals iron have had a tough time in the last few years but are also expected to recover. Russia is here also and grow at 2-3% in the next 4-5 years. So the economics look amazing. Growth of 5% for many countries 2-3% for the commodity exporters. So short-term outlook is very very positive. Let me just compare it to advanced economies Europe US, Japan. We can see that expected growth is around 2% and it often goes below 1% or close to zero and perhaps we are also will turning into a recession when the credit cycle turns. However emerging market economies and developing economies will continue to grow at 5%. If there is a global slowdown they will grow at 3-4%. So economic growth is there. So where do you want to invest? In economics that grow at 2% at their maximum with a recession around the corner or in economics that grow at 5% and are priced cheaper than the developed economics. You make the decision. I'll conclude with a few charts with small commentary just to make you think about what's going on because we live in our world. We see what's going on here. We don't see what's going on in other parts of the world. However that's essential because we are all interconnected. The price we pay here for something is related to the price of that item in Brazil, in Japan, in China. So everything is interconnected in this world. And I have viewers practically in every country in the world already with just this small YouTube channel. So everything is really really interconnected. Let's start with global population growth. So global population growth will slow however. It will be negative in developed markets and still increased by about 3 billion in emerging markets. So emerging markets will have population growth. Something developed countries will not. When the population grows more spending, more infrastructure, more building, growth economy. Especially those that go into development. African countries unfortunately are not at that level yet. I really hope that that turns in the future and we see also Africa as a developing continent. So with the population growth and the fact that the majority of that population is young by 2040 90% of the working-age population will live in emerging markets. China, Middle East, Africa and India. So if 90% of the population, working-age population, lives in developing countries, we can only imagine the productivity. They will have capital in they have more and more capital. So the main productivity which is the essential factor in economic growth, in investment growth, in development will be coming from emerging markets. I want to be invested there. And I'll finish with the expected share of global middle class consumption. For now, India and China are spending around 10% of the global middle class consumption. By 2030 it will be 40%. By 2040 it will be 50%. Other Asia will also grow significantly while developed economies and this is a trend that we can't do anything about. Will decline, not decline in the sense that there will be terrible economic issues, but will decline in their global share of the economic market. The S&P 500 did extremely well in the last 40 years. This is because the US economy did extremely well in the last 40 years. So common sense investing, look at where we are now. Which economies will do phenomenally in the next 40 years as the US economy did in the last 40, 60, 90 years? Emerging markets. Share your emerging markets investing ideas. I love to check them out when you type them down. See the risks, see the rewards. The long-term trends are clear and we just have to find the lowest risk high return investment in emerging markets. And that's why we are here. Click subscribe and I'll see you in the next video.