When asked why he robbed banks, gangster Willie Sutton gave a simple and obvious answer: "'Cause that's where the money is."
Now, unless you're Bernie Madoff or Raj Rajaratnam, there aren't too many parallels between investing and criminal activity, but Sutton's observation still applies. Put simply, you can't make money unless there's money to be made.
What this means for you
Consider, for example, the stores that sell things that can now be streamed over the Internet -- music, movies, video games, and more. Although these companies' store networks once gave them a competitive advantage, the disruptive power of the Internet and the ingenuity of competitors such as Netflix
|
Company |
Return Since 2007 |
|---|---|
|
Blockbuster |
-96% |
|
GameStop |
-22% |
|
Movie Gallery |
-100% |
Data from Capital IQ.
If you're looking to make money in the stock market, stay away from these businesses. There's just too little potential profit here for long-term, business-focused investors.
On the flipside
Contrast that with emerging markets such as China and India. China's GDP is expected to grow between 8% and 9% in 2010, and India's between 7% and 8%. In other words, there's a lot of money to be made in these markets next year and beyond -- so that's where you want to be investing. This is why McDonald's
But I'll let him tell you about that
The Bolton news is particularly interesting. After all, this man's had a phenomenal career. He needs nothing more to burnish his reputation or financial security. Yet as he wrote in a recent Financial Times editorial, he sees something in China that he's never seen before:
I recently spent three months based in Fidelity's Hong Kong office. ... After a few weeks there, I said to my wife that the exciting opportunities available in China, and my belief that the market could go a lot higher over the next few years, made me wish I was still managing money. Rather to my surprise, she said that as I only had one life I should consider running a fund again while I still had the opportunity.
Furthermore, Bolton agrees (as I do) with the assessment by Goldman Sachs' Jim O'Neill that "what is going on in China remains ... the most remarkable and important story of our, and possibly our children's, generation."
Put it all together, and emerging markets today present a once-in-a-lifetime opportunity that is prompting at least one of the world's top money managers to redirect his life's course! Given all of that information, I have to ask: Are you investing in emerging markets this year?
You may not be
Many individual American investors are scared away from emerging markets by their volatility, cultural differences, and inconsistent accounting standards. These are reasonable fears, but they should not make you miss out on the incredible profit opportunities that emerging markets offer today.
This is why we launched our Motley Fool Global Gains international stock research service: To help more American investors get comfortable investing in these top markets. Our team travels the world to meet with companies and investors, and we recommend two stocks each month for you to buy. We're pretty good at that: Our picks rose more than 71% on average in 2009, making us the Fool's top-performing team of analysts (against some serious competition)!
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This article was first published on Dec. 18, 2009. It has been updated.
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Tim Hanson is co-advisor of Motley Fool Global Gains. Apple and Netflix are Motley Fool Stock Advisor selections. GameStop is a former Motley Fool Stock Advisor selection. Motley Fool Options has recommended writing covered calls on GameStop. The Fool's disclosure policy dances like no one is watching.
