Posting a follow up - What do you think about EM in general? Heard one of my favorite investors Howard Marks bring it up in a recent interview, specifically because its underperformed for over 10 years.
Emerging Markets PE is under 13 if you were to buy VWO. S&P is over 20. Its also the one space I would debate paying a little more for active management
A topic of keen interest to me. I spend several years chasing, studying the Indian markets. Other large EM markets would have their own characteristics, but some common themes may rhyme.
BSE Sensex followed similar pattern to SP500. Search "INDEXBOM: SENSEX" in google finance and you will see:
1. Crash of 2000, 50% - 5200 -> 2600.
2. Crash 2008, 60% - 20000+ to 8700.
3. Recovery has been similar. It stands at 36000+ today.
4. The volatility seems higher than SP500.
Indian economy has grown much faster than the US economy in the interim, but the BSE SENSEX has only grown alongside SP500. Ever wonder why?
Well, my pet theory is that the market is not as efficient as the US market:
1. There are many insider trading and price fixing scandals (
https://groww.in/blog/famous-scams-indian-stock-markets/) that are caught, and probably many more that are not!!
2. The "promoters" (i.e. the stock market fat-cats) skim off too much of the return for themselves.
3. It is conventional wisdom (i.e. nice way to say it is not backed by rigorous research) in the indian market that active investing tends to beat passive investing simply because the active managers can avoid the large, partially government owned enterprises from India's past.
So, I became concerned at the inefficiency of the market instruments available to retail investors and started looking at individual companies. On this, I zeroed in on the Tata group of companies. Yes, the same gang that:
1. swarms all IT shops with cheap indian engineers. (NSE: TCS)
2. Owns Jaguar and Land Rover and was famously trying to make the Tata Nano the new Model T for the emerging markets. (NYSE: TTM)
3. Owns Corus steel (NSE: TATASTEEL)
My interest in the Tata group was part value stock chasing, and part ethics driven. Tata Sons (the group company) is majority owned by very well-run charitable entities. These entities are known for running some of the top schools, universities and educational institutes in India that make measurable impact in the "teach someone to fish" fashion. TIFR, TERI etc bear their names. There are many others where they donated vast sums and are premier institutes of education of India today.
I'm also impressed that they don't waste money building temples and mosques and churches (something I consider wasteful) or focus solely on "give someone fish" brand of charity.
For every $1 in profit that TCS software engineers bring home - > $0.50 go towards one of those well run charitable trusts.
This is not to say Tata group never made ethical mis-steps. The group companies are independent and they have sometimes done egregious things. They famously helped the British empire trade opium in China back in the 18th century - causing a lot of human misery. In general, however, tata group is known for their sense of ethics.
So, armed with the hundreds of hours of research long time ago (before 2007) I did loads of paperwork to trade some of the individual stocks in the Indian market and made some ho-hum returns (nothing better than simply investing in SP500).
Since about 2009, I have not done it any more. What's the point of chasing a market that is anyway correlated with SP500, gives similar returns and is a huge paperwork headache!! You complain about paperwork in US banks, try dealing with Indian government paperwork to prove you are not doing money laundering!!
You could do various India ETF's that are out there. But then again - they are likely similarly correlated to SP500 and return similar.
I don't know much about any other markets, so can't comment. China seems scary to venture into. Didn't do a lot of reading up on Brazil (perhaps someone else familiar can comment). Other markets are way too small to spend so much time researching.
That leaves the good ol SP500 for me. I'm happy with it!!