FTSE 100 investors! An investment theme I’m watching now

The FTSE 100 (INDEXFTSE:UKX) and FTSE 250 (INDEXFTSE:MCX) offer ways to participate in the growth of emerging market economies.

The content of this article was relevant at the time of publishing. Circumstances change continuously and caution should therefore be exercised when relying upon any content contained within this article.

You’re reading a free article with opinions that may differ from The Motley Fool’s Premium Investing Services. Become a Motley Fool member today to get instant access to our top analyst recommendations, in-depth research, investing resources, and more. Learn More.

As we get ready to enter the final month of the year, many of my friends ask me if I think 2020 will see an upward trend in equity markets or if we should instead brace for more volatility and even a down-leg. 

My simple answer is that I do not know! The markets will do what they do, it is almost impossible to know the next move. But while I cannot tell you where the FTSE 100 will be in a few months, I can say that I am getting ready to look beyond our borders.

Emerging markets

Most investors allocate a large portion of their investments to their home countries rather than internationally, as they feel more comfortable buying shares in ‘local’ businesses.

Yet the UK accounts for about 3.5% of the world economy. In other words, there is a whole investing world out there. It is estimated that close to half of global Gross Domestic Product (GDP) comes from emerging markets (EMs).

In 2020, I am optimistic about the growth prospects of many EM economies, as well as their stock markets. Domestic currencies of many of these countries have been weak, a fact that also increases the prospects of an up-leg in their national stock indices. 

Furthermore, these economies are not just about low-cost manufacturing, commodities, or materials. Consumer products, plus luxury goods, technology, IT, and financial services are becoming increasingly important for these countries.

EMs and companies in the FTSE 

Most of the FTSE 100 companies are multinational conglomerates and up to three-quarters of their revenues comes from overseas, including EMs. One stock that may be worthy of your attention is consumer products giant Unilever.

Its sales rises in emerging markets, where there is high economic growth and the appetite to use branded consumer staples, have been impressive.  The group’s established global distribution chain and marketing muscle contribute to a strong balance sheet. Unilever’s revenues, earnings, and dividends have been steady over the years and that translates into a robust portfolio choice for most investors, I believe.

Templeton Emerging Markets Investment Trust, a constituent of the FTSE 250, may be another vehicle to invest in for emerging markets exposure. Investment trusts are collective investment funds, where these assets are managed for a fee. In general, they are structured like ordinary companies and have a fixed number of shares in issue.

The trust’s website provides updated information on its core holdings. Currently, almost a third of the focus is on Hong Kong and China. Next in line are South Korea, Taiwan, Brazil, Russia, India, and Thailand.

The Association of Investment Companies (AIC) also publishes detailed data about investment trusts currently on offer in the UK.

How else to invest in EM shares

Another way to increase your portfolio’s exposure to EMs would be to invest directly in high-quality foreign stocks in these countries.

But if you are new to investing or do not have the time to select individual companies internationally, then exchange-traded funds (ETFs) could be the way forward. ETFs are passive investments that may offer diversification over asset classes, industries, or global regions.

Two ETFs to consider could be the Vanguard FTSE Emerging Markets UCITS ETF or Invesco FTSE Emerging Markets High Dividend Low Volatility UCITS ETF.

Should you invest, the value of your investment may rise or fall and your capital is at risk. Before investing, your individual circumstances should be assessed. Consider taking independent financial advice.

tezcang has no position in any of the shares mentioned. The Motley Fool UK owns shares of and has recommended Unilever. Views expressed on the companies mentioned in this article are those of the writer and therefore may differ from the official recommendations we make in our subscription services such as Share Advisor, Hidden Winners and Pro. Here at The Motley Fool we believe that considering a diverse range of insights makes us better investors.

More on Investing Articles

Investing Articles

Should I still be cautious about Rolls-Royce shares?

Rolls-Royce shares are flying. But is now the time for this Fool to open a position? Here, he explains why…

Read more »

Group of young friends toasting each other with beers in a pub
Investing Articles

Is the Diageo share price coiled to rebound?

Christopher Ruane explains why he remains bullish about the long-term outlook for the Diageo share price and would happily invest…

Read more »

Young Asian woman holding a cup of takeaway coffee and folders containing paperwork, on her way into the office
Investing Articles

How I could make a 10% yield for high passive income a reality

Jon Smith explains how he can target high passive income from top-yielding stocks, including one specific example he'd consider.

Read more »

Investing Articles

I’d buy 1,784 shares of this FTSE 100 stock to target £350 of monthly passive income

Muhammad Cheema takes a look at how British American Tobacco shares, with a dividend yield of 10.1%, can generate a…

Read more »

White female supervisor working at an oil rig
Investing Articles

1 ex-FTSE 100 stock that I think will get promoted soon

Jon Smith flags up an energy stock that used to be in the FTSE 100 and currently has strong momentum…

Read more »

Shot of a young Black woman doing some paperwork in a modern office
Investing Articles

With an 8% dividend yield, I think this undervalued FTSE stock is a no-brainer buy

With an impressive yield and good track record of payments, Mark David Hartley is considering adding this promising FTSE share…

Read more »

Passive income text with pin graph chart on business table
Investing Articles

£9,500 in savings? Here’s how I’d try to turn that into £1,809 a month of passive income

Investing a relatively small amount into high-yielding stocks and reinvesting the dividends paid can generate significant passive income over time.

Read more »

Businesswoman analyses profitability of working company with digital virtual screen
Investing Articles

Dividend star Legal & General’s share price is still marked down, so should I buy more?

Legal & General’s share price looks very undervalued against its peers. But it pays an 8%+ dividend yield, and has…

Read more »