14 June 2008
By Joseph Lisanti
If the three little pigs were shrewd investors, they might all build their investments out of BRIC.
Not kiln-dried clay, but stocks of Brazil, Russia, India, and China, often referred to by the acronym, which many investors hope will better withstand the huffing and puffing of current market turbulence.
The rush in the past few years to invest in these emerging economies has boosted their standing among the world's stock markets. According to S&P, the BRIC countries have all advanced in ranking among the globe's stock markets in the past year. At the end of May, Brazil was the 10th largest (up from 16th a year earlier), Russia ranked 15th (up from 18th), India was 19th (from 21st), and China came in 13th (from 15th).
S&P index analyst Howard Silverblatt calculated that the BRIC countries now represent 56.4% of emerging markets and 9.7% of the world, excluding the U.S. With 40.5% of the world's market cap, the U.S. is still No. 1, but America's markets represented 43.2% just a year earlier.
The declining share of the U.S. is one reason experts say Americans need to have more foreign stocks. But building exclusively with BRIC isn't the way to go, according to Ray Mignone, a fee-only financial planner in Little Neck, Queens.
Mignone favors a more diversified approach. In his own practice, Mignone uses portfolios created by Dimensional Fund Advisors.
Since those funds are available only through advisers, he suggested that do-it-yourself investors buy the Vanguard FTSE All-World ex-US Index Fund, which is based on an index that tracks stocks in all developed and emerging markets outside the U.S.