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Looking for a good long-term investment? Perhaps it's time to consider frontier markets…

by , 25 November 2014

If you want to invest some of your portfolio for the long-term into a market that could yield you great returns, you should have a look at frontier markets.

So what are frontier markets? Why are they a good investment opportunity? And what sort of stocks should you focus on?

Let's take a closer look…


What is a frontier market?


A frontier market is of a country which isn’t yet developed. A frontier market hasn’t quite made it to emerging market status yet. Or it was an emerging market, but has since fallen back into frontier market status.

Generally speaking, frontier markets are countries that are small and not that accessible, but are still “investable,” according to Wikipedia.

Frontier markets include Nigeria, Pakistan, Saudi Arabia and Egypt.

Frontier markets hold a lot of potential. They represent some 30% of the world’s population. They contribute 15% of the world’s gross domestic product (GDP). But they only contribute a mere 3% of the world’s stock market value.

These frontier markets are likely to boom over the coming decades. The number of people working will increase. And economic growth should take off over the next decade.

At the moment, seven of the ten fastest growing economies in the world are frontier markets.


Where to look for investment opportunities in frontier markets


The growing middle-income segment in frontier markets is most likely to be the most attractive opportunity in terms of consumer stocks, Hedi Ben Mlouka, fund manager of Duet Frontier Fund told Money Week.

You could invest in well-known global companies that look set to benefit from growth in frontier markets. Examples include Unilever and Nestle which have affiliates operating in some frontier markets like Nigeria and Pakistan.

Other sectors that could do well include healthcare and banking.

The trick here is to concentrate on sectors of the economy that will do well as incomes and standard of living rise, and pinpoint the best companies in those sectors.

Frontier markets look set to perform for the next 20-years or so.

So there you have it. If you’re looking for a good long-term investments, perhaps it’s time to consider frontier markets.

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Looking for a good long-term investment? Perhaps it's time to consider frontier markets…
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