Last updated June 16th, 2024.
Investment advisors, especially those in the western world, often tell their clients they cannot beat the market.
They’ll say a “market average” return of about 7% per year is the best you can get over the long-term.
Granted, that might be true if the United States (or wherever you happen to live) were the only country on Earth. Indeed, there are statistics proving the merits of investing into an index fund versus picking your own stocks.
Few investment advisers think outside the box though. Even less of them think internationally. They’re constrained by the borders of the country they’re living in.
See, there isn’t just “the market”.
From Thailand, to Vietnam, to Japan, there are many different markets. Some of them are stock markets, others are private equity or real estate markets.
You’ll find that markets behave differently even within the same country! Tokyo’s real estate market, for example, has completely separate fundamentals and investment prospects than in Nagoya.
Either way, plenty of these markets host opportunities that you can’t find in your home country at all.
They’re generally uncorrelated with the S&P 500 which makes the “7% average” a rather meaningless figure if taken within a global context.
Breaking Entry Barriers: Do What Others Can’t
You may still wonder: “if better returns are found in other countries, why doesn’t everyone invest in these places?”.
The answer? Barriers to entry. High-growth frontier markets, such as Laos and Cambodia, don’t have stock exchanges that are fully functional and liquid. As such, there aren’t any simple or reliable options to invest in them.
Institutional buyers – those wanting to deploy a large amount of capital at one time – are facing problems in particular.
For example, it would be impractical for iShares to start an ETF that focuses purely on Mongolia. Frontier markets like them are simply too small.
These countries can’t offer high liquidity or other requirements that firms like JPMorgan demand. Even if they managed to wade through all the bureaucracy and foreign regulations.
Many finance “experts” claim that markets are efficient, and as such, achieving outsized returns on investments compared to the risk involved is impossible.
In reality, there are countless examples of market inefficiency. But even if the theory were true, it would only apply to markets that investors can trade in without entry barriers.
The fact remains: markets aren’t efficient if few people ever put forth the effort required to access them.
Cambodia is among the fastest growing nations on the planet. They also have the world’s smallest stock exchange with only eleven listed companies. Investing here requires a bit of originality.
Personal Effort Beats the Market
Speaking of effort, the time you personally spend can help outperform the average. Never underestimate the impact additional labor can have on your investments.
It might sound cliche and obvious, but your work does have value.
That’s the reason why day traders commonly beat the market, outperforming more passive stock investors. Property flippers often make consistent returns in the double-digit range because of their extra work as well.
Similarly, massive hedge funds and other financial institutions wouldn’t ever spend millions on skilled analysts if the added cost wasn’t worth their labor.
You may not have enough time nor the expertise needed to become a professional day trader or property flipper. Most people certainly do not.
However, REITs, and private placements are all different ways to let someone else do the work on your behalf. Sometimes they’ll charge a fee – and the fee could be worth saving yourself the hassle.
Our experience is that the best-performing investments often combine personal effort with breaking down entry barriers. It’s even better if you can do so in stable countries with strong growth prospects.
So, how can you consistently beat the market? You’ll need to either think way outside the box, or add value through your own effort.
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