GSI Emerging Markets

1. Why You Should Invest in Emerging Markets

THEY DIDN'T TEACH THIS STUFF IN BUSINESS SCHOOL!

In the early 1990s, I made a fortune buying open-end funds in the "developing countries" of Asia and Latin America. In the process, I developed a systematic process that you too can easily follow to safely reap the rewards that these emerging markets offer. Particularly now as we enter the new millennium, these markets are especially ripe for making significant amounts of money.

You will be pleased to know that following my investment program for these country funds requires very little stock-trading knowledge. So whether you are a new investor or a sophisticated trader with years of experience, you can benefit from these strategies.

My system was designed to require only 15 minutes a day to manage, much less if you take the long-term approach. So you will not even need to quit your day job in order to maximize your investment returns.

How did I gain this knowledge? It all started in college ....

I became a business major primarily because I wanted to be successful making lots of money. It seemed very logical: Most of the wealthy people I had heard of (at that time, I did not actually know anyone wealthy) made their money in one form of business or another. Oh, and then there were doctors, but that's another story.

So, in 1983, at the age of 17, 1 entered my university as a business major. It wasn't too long-after an accounting class or two-that I felt a bit bored and creatively unchallenged as a business major. But more important, they were not teaching me how to make money; they were teaching me how to make other people money.

After graduating, my wanderlust spirit started to take root, so I looked for graduate programs in business in exotic locations. I selected the University of Hawaii in Honolulu. Hawaii was a respected international business school, specializing in the Asia-Pacific region. And I even got a full teaching assistantship, with tuition waivers. Now I could finally learn to make money!

Well, you would not believe it: They do not teach you how to make money in graduate school either. As in undergraduate school, they teach you how to make other people money In Finance, we learned how to calculate the "future value" of things. I never used any of this in business later-not even when I worked for a bank in Asia. In Managerial Accounting we learned about . . . you know, I cannot really remember. And Economics . . . well, we did learn about interest rates and inflation, but not how it applied to the real world.

So, I graduated with an MBA at the age of 23, and entered the real world to learn about business and how to make money.

After a year or so of working for a management consulting firm, first in Washington, D.C., and then in Toronto, I took the second big adventure of my life: I packed my bags and moved to Hong Kong and China in search of success and happiness. This would prove to be one of the most educational and interesting decisions of my life.

It was 1990, and the United States was entering a recession. As a relatively fresh MBA, I was not in great demand in the American workforce at the time. Young MBAs were the first to be cut from companies hit by the struggling economy. Europe was also hit hard. But Asia was booming. Not having secondary language skills, however, limited my choices. For example, Japan had its own MBA population and was a monolinguistic society. Hong Kong stood out among the Asian countries: highly capitalistic, American-friendly English was a common second language, lax visa standards, and a desperate need of American management know-how. What a great opportunity to put my making other-people-money skills to good use.

My second job in Hong Kong was where I first really learned about international finance and how to make myself money. I was hired as special assistant to the general manager of Standard Chartered Bank. Standard Chartered is a British bank with a long history in developing countries, particularly China and India. It was here, as the personal assistant to the bank's chief executive, that I got to see firsthand the daily operations of the bank's retail, corporate, treasury, stock broking, and private banking divisions. It also was here that I watched senior executives manage their own money from Reuter's terminals on their desks.

As you may know, Reuter's is an internationally respected news service, which sends live news, stock, and other financial information to special terminals for a very costly monthly fee (thousands of dollars, I believe).

I am very excited to tell you that now you and I can get most of this information free over the Internet. Later I will explain how you can receive live stock data at very reasonable monthly fees. This is a very special time for the personal investor.

It was also at this time that I jumped in and took my chances at stock market investments. My first risky investment was an $800,000 apartment I purchased with a loan from my bank; I quickly resold it at a profit a few months later. In 1990, without the Internet and online brokerage houses, if small-time investors like me wanted to get a piece of the action, we could do it through mutual funds. At the time, there were a handful of fund companies that specialized in open-ended emerging market mutual funds. (A little later I will discuss open-end and closed-end funds in detail). I took my profits from my real estate venture and invested them in India, China, Singapore-all of the booming Asian markets-through mutual funds.

In this process, I learned how to leverage my investments by taking margin loans from the fund companies. (I also will discuss these terms in greater length later) ...