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Characteristics and differences between an investment in an emerging market and one in a developed m


Today we keep reviewing the characteristics and differences between an investment in an emerging market and one in a developed market. We will more precisely look at this topic in terms of returns.

There is no doubt that on this specific topic, emerging or frontier markets offer greater potential returns than developed markets. Please note the “potential” which is extremely important here.

In Finance, there is famous concept called the risk-return trade-off. Put it simple it means that there exists an inverse relationship between investment risk and the return this investment can produce.

Investing in emerging markets involve many different risks but the returns can be consequent.

One of the reasons is relatively simple to understand.

If you take a frontier market like Vietnam for instance, you can see that investments from foreigners are still low. In fact even though the number of foreign investors and their investments keep increasing at high rate, it could be argued that they are still low compared to other similar markets or developed markets.

Anh Thomas Investment is the overall leader when it comes to foreign individual investors investing in Vietnam. We have a lot of experience with these investors and we know them pretty well.

It turns out that many potential investors coming from developed countries are not willing to invest in markets like Vietnam yet. They simply lack the confidence in the legal and banking systems. We can argue that these fears will be overcome soon and these risk-adverse investors will certainly get in the markets at this time. This will definitely push stocks values up. There is also the returns potential linked to the economic growth which far higher in emerging countries than in developed markets. All these elements make an investment in an emerging or frontier market a potentially extremely lucrative investment.

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