Is Now the Time to Invest in Emerging Markets?
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    HOUSE MEDIAN ASKING PRICES AND WEEKLY CHANGE     Sydney $1,581,977 (+0.10%)       Melbourne $970,512 (+0.23%)       Brisbane $885,023 (+0.03%)       Adelaide $813,016 (+0.20%)       Perth $760,003 (-0.11%)       Hobart $733,438 (-1.28%)       Darwin $643,022 (-0.79%)       Canberra $970,902 (+1.87%)       National $1,000,350 (+0.23%)                UNIT MEDIAN ASKING PRICES AND WEEKLY CHANGE     Sydney $721,725 (+0.37%)       Melbourne $488,237 (-0.76%)       Brisbane $495,283 (+1.37%)       Adelaide $404,022 (-2.77%)       Perth $405,420 (-0.69%)       Hobart $498,278 (-1.60%)       Darwin $339,700 (-0.58%)       Canberra $480,910 (-0.04%)       National $502,695 (-0.26%)                HOUSES FOR SALE AND WEEKLY CHANGE     Sydney 10,626 (-230)       Melbourne 15,220 (+56)       Brisbane 8,417 (-24)       Adelaide 2,720 (-9)       Perth 6,897 (+56)       Hobart 1,234 (+5)       Darwin 281 (+5)       Canberra 1,079 (-30)       National 46,474 (-171)                UNITS FOR SALE AND WEEKLY CHANGE     Sydney 8,563 (-253)       Melbourne 8,007 (-12)       Brisbane 1,824 (-34)       Adelaide 493 (-16)       Perth 1,902 (-1)       Hobart 176 (+4)       Darwin 388 (-7)       Canberra 858 (+2)       National 22,211 (-317)                HOUSE MEDIAN ASKING RENTS AND WEEKLY CHANGE     Sydney $775 (-$5)       Melbourne $570 ($0)       Brisbane $600 ($0)       Adelaide $580 (+$10)       Perth $625 (-$5)       Hobart $550 ($0)       Darwin $690 (-$10)       Canberra $680 ($0)       National $642 (-$2)                UNIT MEDIAN ASKING RENTS AND WEEKLY CHANGE     Sydney $730 ($0)       Melbourne $550 ($0)       Brisbane $625 ($0)       Adelaide $460 (+$10)       Perth $580 (+$5)       Hobart $460 (+$10)       Darwin $550 ($0)       Canberra $560 (-$5)       National $576 (+$2)                HOUSES FOR RENT AND WEEKLY CHANGE     Sydney 5,654 (+231)       Melbourne 5,764 (+128)       Brisbane 4,271 (-9)       Adelaide 1,259 (+101)       Perth 1,944 (+50)       Hobart 337 (-36)       Darwin 168 (+19)       Canberra 647 (+18)       National 20,044 (+502)                UNITS FOR RENT AND WEEKLY CHANGE     Sydney 9,121 (+505)       Melbourne 6,022 (+34)       Brisbane 2,066 (+18)       Adelaide 366 (+1)       Perth 600 (-5)       Hobart 138 (-17)       Darwin 306 (+12)       Canberra 736 (+20)       National 19,355 (+568)                HOUSE ANNUAL GROSS YIELDS AND TREND         Sydney 2.55% (↓)       Melbourne 3.05% (↓)       Brisbane 3.53% (↓)     Adelaide 3.71% (↑)        Perth 4.28% (↓)     Hobart 3.90% (↑)        Darwin 5.58% (↓)       Canberra 3.64% (↓)       National 3.34% (↓)            UNIT ANNUAL GROSS YIELDS AND TREND         Sydney 5.26% (↓)     Melbourne 5.86% (↑)        Brisbane 6.56% (↓)     Adelaide 5.92% (↑)      Perth 7.44% (↑)      Hobart 4.80% (↑)      Darwin 8.42% (↑)        Canberra 6.06% (↓)     National 5.96% (↑)             HOUSE RENTAL VACANCY RATES AND TREND       Sydney 0.7% (↑)      Melbourne 0.8% (↑)      Brisbane 0.4% (↑)      Adelaide 0.4% (↑)      Perth 1.2% (↑)      Hobart 0.6% (↑)      Darwin 1.1% (↑)      Canberra 0.7% (↑)      National 0.7% (↑)             UNIT RENTAL VACANCY RATES AND TREND       Sydney 0.9% (↑)      Melbourne 1.4% (↑)      Brisbane 0.7% (↑)      Adelaide 0.3% (↑)      Perth 0.4% (↑)      Hobart 1.5% (↑)      Darwin 0.8% (↑)      Canberra 1.3% (↑)      National 0.9% (↑)             AVERAGE DAYS TO SELL HOUSES AND TREND       Sydney 28.0 (↑)      Melbourne 29.2 (↑)        Brisbane 30.6 (↓)       Adelaide 23.8 (↓)     Perth 34.2 (↑)      Hobart 29.4 (↑)      Darwin 39.9 (↑)      Canberra 28.2 (↑)      National 30.4 (↑)             AVERAGE DAYS TO SELL UNITS AND TREND       Sydney 29.4 (↑)      Melbourne 29.6 (↑)        Brisbane 30.3 (↓)       Adelaide 22.5 (↓)       Perth 39.2 (↓)     Hobart 26.1 (↑)        Darwin 36.1 (↓)     Canberra 34.4 (↑)        National 31.0 (↓)           
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Is Now the Time to Invest in Emerging Markets?

Emerging-markets stock ETFs offer exposure to higher-growth markets, but they also can be volatile. Here is a look at the pros and cons of these investments.

Tue, Sep 5, 2023 8:03amGrey Clock 5 min

For some investors seeking to diversify their portfolios, emerging markets are looking increasingly attractive.

There are 169 emerging-markets stock ETFs available to fund investors, with total assets of about $296 billion, according to fund researcher Morningstar Direct.

Some analysts and financial advisers say there is a lot to like about this sector right now. What is the argument for putting money into these exchange-traded funds? And what’s the argument for getting out, or not starting at all? Here’s a look at the pros and cons.

The Pros

One factor driving interest in emerging-markets ETFs is that emerging economies are growing faster than advanced economies, and that isn’t forecast to change soon. The International Monetary Fund forecasts real GDP growth of only 1.4% in advanced economies in 2024 due to inflation, monetary policy and other factors. In contrast, the IMF projects real GDP growth of 4.1% for emerging and developing economies, helped by countries such as India, which is expected to grow at a rate of 6.3%.

“The biggest reason to invest in emerging-markets ETFs today is to gain exposure to high-growth markets with burgeoning middle-class consumers such as China, India, Mexico, Taiwan, South Korea and Vietnam,” says Aniket Ullal, senior vice president and head of ETF data and analytics at CFRA Research. He says emerging markets are home to more than 4.3 billion people, and they account for about half of global GDP.

Crowds in the Ximen shopping district in Taipei, Taiwan., in June. Taiwan is one of the emerging economies that some ETFs focus on. PHOTO: AN RONG XU FOR THE WALL STREET JOURNAL

Another attraction is that valuations on emerging-markets stocks are low. While the price-to-earnings ratio of the S&P 500 was 22.4 based on trailing 12-month reported earnings as of July 31, the P/E ratio of the MSCI Emerging Markets—which includes the stock of most liquid large- and midcap companies in 25 emerging-market countries—was 14.13.

“This is a smart contrarian play for investors who want to diversify their portfolios geographically,” says Gabriel Shahin, president of Falcon Wealth Planning, an investment adviser in Los Angeles. “There is a fire sale going on in emerging-market stocks, and this is one of the smartest plays in equity investing right now.”

Some see these investments as a hedge, considering this year’s U.S. stock rally—dominated by a small number of large-cap technology companies—could end at any time.

Emerging-markets ETFs come in many varieties, so investors can choose those that align with their macroeconomic outlook and financial goals.

While some of these funds invest in a broad basket of emerging-market countries that span the globe such as the $72.1 billion iShares Core MSCI Emerging Markets ETF (IEMG), others invest in geographic regions such as Asia or Latin America or are country-specific.

The $64.2 million Franklin FTSE Latin America ETF (FLLA), for example, invests in large-cap and midcap companies in Brazil, Chile, Colombia and Mexico. It has returned more than 19% year-to-date through Aug. 29 and 15.6% over the past year. The $175.8 million Franklin FTSE Taiwan ETF (FLTW) invests in midcap and large-cap Taiwanese companies. It has a year-to-date return of 14.7% and a one-year-return of 8.2% as of Aug. 29.

For investors concerned about the economic slowdown in China, there are emerging-markets ETFs that exclude Chinese equities such as the $5.16 billion iShares MSCI Emerging Markets ex-China (EMXC). Its top holdings are Taiwan Semiconductor Manufacturing, Samsung Electronics and Reliance Industries.

Some emerging-markets ETFs target small- or large-cap stocks. One is the $34.2 million VanEck Brazil Small-Cap ETF (BRF), which is up about 32% year-to-date and 11.4% over one year as of Aug. 29. Others focus on industry sectors such as technology and e-commerce.

While most emerging-markets equity ETFs track indexes, an increasing number of newer funds are actively managed. Of the 11 emerging-markets ETFs that have launched this year, eight are actively managed, including Global X Brazil Active ETF (BRAZ), a $2.61 million fund that invests in Brazilian companies such as Petrobras, a multinational petroleum company, and Vale, the world’s largest iron-ore producer.

There are even emerging-markets ETFs that pay dividends, such as the $243.5 million SPDR S&P Emerging Market Dividend ETF (EDIV), which is up 28.2% year-to-date through Aug. 29 and has a dividend yield of 3.78%.

According to Morningstar Direct, the top-performing emerging market ETFs this year through Aug. 29 are VanEck Brazil Small-Cap, SPDR S&P Emerging Market Dividend and iShares MSCI Brazil Small-Cap (EWZS), which is up 24.1% so far this year and 5.7% over one year.

The Cons

Some advisers, however, say investors looking at emerging-markets equity funds should proceed with caution.

“Emerging-markets equity ETFs are more volatile than international ETFs that focus on stocks in advanced economies,” says Lan Anh Tran, a research analyst at Morningstar Direct. Over the past 10 years ended July 31, 2023, the standard deviation of the MSCI Emerging Market Index was 16.2% higher than the MSCI World Index—a proxy for global developed-market stocks, she notes. Standard deviation measures volatility, with a higher number representing more volatility.

That’s because any sudden geopolitical event (such as the war in Ukraine) or any economic shock (like soaring inflation or a global supply-chain disruption) can have a jarring effect on emerging-market economies that are dependent on commodity exports, tourism and the health of advanced economies, investment strategists say.

There also is the risk of government influence and regulation on emerging-markets stocks, says Tran. A government, for example, can decide to nationalize an industry at any time, or exercise control over an industry sector.

Currency movements are another risk factor to consider, says CFRA’s Ullal. “If the dollar strengthens against local currencies, your fund returns will erode,” he says.

“It’s important that investors understand this is a high-risk, high-reward investment before they dive into them,” says Andrew J. Feldman, the founder of A.J. Feldman Financial in Chicago. “These funds can be highly volatile due to a host of systemic risks in emerging-market countries, including economic risk, geopolitical risk, currency risk and liquidity risk.”

These challenges make some investors skittish about investing in emerging-markets ETFs, says Kevin Shuller, founder and chief investment officer of Cedar Peak Wealth Advisors in Denver. “They believe that companies domiciled in the U.S. do a lot of business in emerging markets, so if you own the S&P 500 or MSCI EAFE index you have all the exposure you need.”

“It’s a good counterargument,” he says, “but [it] doesn’t take into account that the party in the U.S. stock market may not go on forever.”

Many investment advisers instead suggest individual investors take a step-by-step approach when choosing an emerging-markets ETF and allocate 5% to 10% of their equity portfolio in such vehicles.

“Country selection matters most so check the fund’s geographic exposure,” says Perth Tolle, founder of Life + Liberty Indexes and the $625.4 million Freedom 100 Emerging Markets ETF (FRDM), which invests in about 100 companies in 10 countries that aren’t autocracies but freer markets such as Chile, Poland, South Korea and Taiwan.

Also look at the methodologies and metrics the ETF uses when choosing stocks for its index or portfolio, as well as the fund fees. The average expense ratio for this ETF group is 0.51%, according to Morningstar Direct.

“A good way to assess a fund’s value is to look at its weighted average price to cash flow,” a measure of the price of a company’s stock relative to how much cash flow it generates, says Kevin Grogan, chief investment officer at Buckingham Wealth Partners in St. Louis. It gives a pulse reading on how cheap or expensive the emerging-markets stocks are in the fund.


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What Your Friends Can Teach You About Money

Millennials and Gen Z are turning to peers instead of professionals for financial advice. They don’t trust banks, and they are tired of information overload.

Sun, Dec 10, 2023 5 min

Colin Saint-Vil got his money education at the dim sum cart, over a steamy plate of pork buns and turnip cake.

A friend offered to pick up the whole tab on her credit card, “for the points.” At the time, six years ago, “for the points” meant nothing to Saint-Vil, now a 30-year-old planning manager in Brooklyn, so he pressed for more details. They lingered over the dim sum meal as a larger conversation unfolded about annual percentage rates, credit-card debt, payment schedules and more.

Millennials and members of Gen Z prefer to seek financial advice from each other than from parents or from financial professionals. They don’t like overwhelming spreadsheets and marketing material written in seemingly foreign languages. They don’t trust big banks and institutions trying to sell them on investment strategies—as many were raised around the late 2000s financial-crisis. And, they are not wrong: There is a lot to be learned from comparing numbers with peers—from sharing salaries to talking out big decisions like home or car purchases.

Saint-Vil said when his father was his age, he had already begun investing in real estate, but with property prices now so high and mortgage rates only just beginning to fall, he said he couldn’t imagine being able to follow in his father’s footsteps. He, like many millennials and Gen Z-ers, describe their finances as “fairly good” these days, though they hold a negative picture of the greater economy, according to a new poll of 18 to 29-year-olds from the Institute of Politics at Harvard Kennedy School.

Millennials are still reeling from the impact of back-to-back recessions, all while large bank closures and investing scams dominate the headlines. Younger people report a feeling of “financial avoidance” exacerbated by high inflation and the pandemic-era budgeting.

As of June 2023, Gallup polling revealed a historically low faith in U.S. institutions, with younger generations voicing high skepticism. According to Gallup, only 9% of respondents aged 18 to 34 expressed “a great deal” of confidence in banks; meanwhile, 47% and 28% said they have “some” or “very little,” respectively.

But when it comes to winning back young consumers, these same financial institutions haven’t quite given up, and are rolling out new outreach programs and robo advisors, some of which have helped bridge a connection with Gen Z and millennials, said Keith Niedermeier, clinical professor of marketing at Indiana University. But many young people still say they prefer do-it-yourself investing platforms like Robinhood and Acorns over traditional advisers at more established wealth-management firms.

Andrew Ragusa, a real-estate broker based on Long Island, blamed the twin problems of low housing inventory and high home prices for postponing younger buyers’ ownership. The median age of a first-time home buyer in the U.S. is 35-years old as of 2023, according to data from the National Association of Realtors. That is slightly down from an record high of 36 in 2022, but still two years older than the median age in 2021, which is representative of an ageing first-time buyer trend.

When he talks with younger clients now, he detects a gloomy sentiment. “They try to be optimistic, but the overall sentiment is ‘This is supposed to be the American dream: we get a house and we get some financial security and I just have to have faith it will all work out in the end.’ But they don’t have faith it will.”

Fear and shame around being able to buy or accomplish as much as one’s parents might have financially can crop up when millennials talk to elders about their financial frustrations, said Jodi Kaus, director of Kansas State University’s student financial planning centre, Powercat Financial. She’s found that lessons and advice from friends are often more constructive.

Kaus leads a peer-to-peer financial planning centre that pairs up students to work through financial issues. She works to pair people with similar backgrounds: graduate students with graduate students or international students with international students. Talking with someone only a few years removed from your current situation means you’re better able to internalize the messages and execute on their advice, Kaus said.

“Early on, parents even say ‘Are you sure students can help my child?’” she said. “And I say ‘I am more than confident that they can help each other.’

Sharing money tips and financial know-how with your friends doesn’t only benefit the asker, Kaus said. In the Kansas State University peer-to-peer group, the advice giver also learns a lot from their own position, because sharing their story and bonding with a peer helps them to build their own confidence and belief in their financial acumen.

Lindsay Clark, a 34-year-old director of external affairs in Washington, D.C., recalls one lesson she shared with a friend carrying student loans from pharmacy school. Clark works at Savi, a student loan platform, and she offered to cook her friend dinner while they sorted through his loan repayment options. Long after they’d cleaned their dinner plates, they sat together at Clark’s kitchen island, lingering over a plate of homemade hummus and chatting about everything from financial goals to Costco card benefits.

“Those conversations blossom from the transparency, and the visibility makes both people feel really good,” she said. “That creates better relationships overall.”

When you’re talking about money issues with friends, Clark said, you’re not artificially inflating your salary or pretending to know more than you do. And most important, you’re not worried about their ulterior motives.

“You feel safe in that conversation, knowing their intentions are good and they’re not trying to make money off of you,” she said. “And that’s going to lead to better results, because we’re working with the reality here.”

Skepticism of pronounced experts and criticism of established financial institutions is especially common among millennials and Gen Z, Neidermeier said. Studies show people across generations are much likelier to take a friend or colleague’s recommendation to heart over that of a faceless institution, he said; people who spend time on social media just have a greater opportunity to source those answers and field questions.

“What people say to each other over the picket fence is what is the most influential,” he said.

At a certain point, however, talking solely to friends and peers for your financial lessons can be very limiting, said Sarah Behr, founder of Simplify Financial Planning in San Francisco. Relying on your social circle can also put a strain on those relationships; no one wants to be responsible for your disappointment when a financial decision that worked out well for them doesn’t fit as well in your own life.

Behr recommends tuning into your own emotional reactions when assessing peer advice: does the road map they followed align with your own financial values? Does it put pressure on you to live outside your means or challenge your personal risk tolerance? If the answer doesn’t feel clear, that could be a time to outsource to a financial professional who has no emotional connection to you or your financial status.

“‘People have been telling me do this, but I just don’t know if it’s the right thing for me’—I get a lot of calls like that,” said Behr.

Saint-Vil said he and his friends share tips on what high-yield savings accounts offer the best rates, and when he did his credit card research, he chose a card recommended by a friend. When it comes time to work with a financial adviser or even one day a wealth manager, he’ll likely work with someone recommended through a peer. Behr said close to 90% of her business comes by way of client referrals.

Since that first conversation over dim sum, Saint-Vil has thrown his own card onto the table at meals and shared his knowledge with other pals who look confused.

“I have a real wide range of friends who are in many different financial places, but I would say a rising tide lifts all ships,” he said.

Julia Carpenter is the co-author, with Bourree Lam, of The Wall Street Journal’s “The New Rules of Money: A Playbook for Planning Your Financial Future,” a personal-finance workbook published this week by Clarkson Potter, an imprint of the Crown Publishing Group.


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