Just asking... I don't really follow him or know much about him... The Globe & Mail had a story on him...
Question: You've had stellar returns in some years and losses in others. Over 15 years, your average annual return is 2 per cent in Templeton emerging markets. Should investors try to time these markets?
Mobius: I'd advise dollar-cost averaging. Don't put everything in at once so you get a good price in the up and down markets. You have to hopefully come in when everybody else is selling. That is the best thing.
But if you look at the average return for our emerging markets fund from inception [in 1991], it's 5 per cent. And that is not bad. If you were to come in when things were bad and the prices were down, you would have done even better than that.
I don't know what the emerging market index posted during that time but in absolute terms, 5% is very poor. That's roughly what long bonds produce*. Yes, the Asian Tigers blew up and Latin America faced numerous crises but emerging markets are supposed to account for that risk.
I have a suspicion that investors in the over-glorified BRIC--Brazil, Russia, India, China--will underperform old economy Europe for the next decade or more. Just a guess and haven't done any work but that's what I'm thinking right now. On top of one of those countries blowing up** and taking down anyone nearby, valuations are high***.
(* But if you purchased long bonds in the last few decades, you would have done much better.)
(** Consensus seems to be that Russia has the highest chance of blowing up but I feel it is China, followed closely by India. The safest seems to be Brazil.)
(*** Historically, high valuations have almost always generated poor returns. China and India were trading at really high P/Es over the last 5 years. Brazil and Russia also seem overvalued with very low P/Es (both of these have high exposure to commodity cyclicals and hence a low P/E is not necessarily cheap.) Right now the valuations don't see so high but it's difficult for me to say given how profitability has likely weakened. Although one shouldn't paint with a broad brush, it is also rare to see "popular themes" yielding high returns to many--except for those lucky or skilled enough to get on the train long before others. Even people who know little about investing (i.e. neither professional or amateur investors) often say that the best countries to invest in are China and India.) Tags: opinion