Investing is all about taking chances – but you can smooth that risk by taking a considered approach to choosing your opportunities.
Fund manager Austin Forey of JP Morgan’s Emerging Markets Investment Trust has taken some time out to pass on some of his 20 years of experience with eight rules he believes investors looking to make money from the Asia Pacific markets should follow.
His advice is to take a considered approach and score the risk on each opportunity in the same way to give a comparison base line.
Here’s his list of the pointers to consider:
Money matters – Ask if you are likely to make or lose money on the investment. Any other analysis should support the answer to the question
Avoid debt – Debt limits choices, while cash leaves you with options. Too much debt will eventually pull you, or a company you invest in, under
Consider inflation – Inflation can mask the reasons behind growth. Business performance can look quite different once the effects of inflation are considered
How does the company generate profits? – If you know why they are making money, you can also isolate the reasons why they may stop making money at some time
Look forward – The past is an indicator but circumstances may have changed and will change, so try to be forward thinking and work out where a company is going
Work on facts – It’s easy to fool yourself into making a decision, but try and separate facts from hopes
People matter – Good managers can make all the difference to returns on investment, so find out who the people are that really matter to the company and whether they are likely to stay
Focus on the company – Some companies do well even if the rest of their sector or the general economy is under a cloud. Look at the business rather than taking a broader view
To go with his ‘golden rules’, Forey explains his reasoning behind why investors should continue to put money into emerging markets.
“Stock market returns have not been as good as expected over recent years, but the long-term expectation of making money from emerging markets has not diminished,” he said.
“Ignoring emerging markets means not considering an opportunity that takes in most of the global population and a significant and increasing share of the global economy.
“The best emerging economy companies are every bit as good as those in developed economies.”
