When now-retired Goldman Sachs (NYSE:GS) economist Jim O'Neil first dubbed the four nations of Brazil, Russia, India and China the “BRIC” countries back in 2001, he made one of the gutsiest long-term global macro-economic calls - that these nations would be the biggest drivers for future global growth. O'Neil's prediction has, for the most part, come true. Presently the combined GDP output of the BRICs equals half of the entire 34 country based Organization for Economic Co-operation and Development (OECD). More importantly, the stocks within the nations- as represented by the MSCI BRIC index- have risen by more than eight times what the S&P 500 index returned during the past decade.
However, things aren’t going so swimmingly for the four nations of Brazil, Russia, India and China. Returns for the BRICs have been less than stellar lately. That poses the question- Have the BRICs cracked or are they a huge value for portfolios?

SEE: Understanding BRIC Investments
A Short-Term Sidestep 
Featuring large growing populations, rising domestic wealth and vast commodity resources, the BRICs have managed to capture the emerging market spotlight and rise to the top. Overall, the four nations are poised to be the next leaders on the world stage. Goldman Sachs, estimates that the group will grow to become four of the six largest world economies over the next 38 years. So far, the BRIC bloc has lived up to that promise.
That is until recently, when potential cracks began to form.
Much of the BRICs prominence has been driven by the notion of exporting something- whether it be finished goods or raw materials- to the developed world. With stymied growth in the U.S. and recessions/austerity budgets driving the European Union, the four horsemen of the emerging world have suffered.  As major commodity producers, both Russia and Brazil have seen their fortunes fade as energy and minerals prices have dropped. Likewise, India’s tech-driven outsourcing market has been hurt as developed market companies still continue to put-off IT spending. Finally, rising costs of labor in China has made the nation less of a manufacturing sector as well.  
These factors- plus China’s efforts to cool inflation as well as India’s problems with infrastructure- have caused the BRICs to under-perform in recent years. The Brazilian and Russian stock markets have lost roughly 15% and 13%, respectively this year and China has managed to fall around 3%. This compares to the nearly 15% gain for the SPDR S&P 500 (ARCA:SPY).
Yet, despite these drops much of the long-term growth story of the four nations continues to remain intact- specifically their consumer stories. As these nations have grown and continue to do so, they have begun to switch from purely exporting countries to ones with vibrant consumer centers. Incomes continue to rise as work forces expand and life expectancies are rising. Together, the BRICs account for about 42% of the world's population. That’s a lot of potential consumer power.

SEE: Potholes In The Golden BRIC Road
Laying A Foundation With The BRICs 
While the four nations make the bulk of broad-based emerging market funds like the Schwab Emerging Markets Equity ETF (ARCA:SCHE), there are ways to bet directly on the bloc's success. That includes both the Guggenheim BRIC ETF (ARCA:EEB) and SPDR S&P BRIC 40 (ARCA:BIK). However, the easiest and best way could be through the iShares MSCI BRIC Index (ARCA:BKF). The fund tracks 318 different BRIC-based firms including leaders like Chinese PC leader Lenovo (OTCBB:LNVGY) and Indian generic drug superstar Dr. Reddy's Laboratories (NYSE:RDY). Overall, both China and Brazil make up about 70% of the fund's holdings, with India and then Russia rounding out the group. The fund charges 0.69% in expenses and yields 2.13%. Overall, the fund makes an ideal way to add extra BRIC exposure to a portfolio.
Investors may want to change the lowercase s in BRICs to an uppercase letter to represent South Africa. The four nations in the bloc decided to add Africa’s rising star to the group back in 2011. Yet, South Africa isn’t featured in any broad BRIC index as of yet. Featuring many of the same demographic trends and potential as the rest of the four countries, investors may want to add the iShares MSCI South Africa Index (ARCA:EZA).
Finally, as the BRIC matures, consumerism is playing a bigger role in their economic expansions. As such, funds like the Global X China Consumer ETF (ARCA:CHIQ) and EGShares India Consumer (ARCA:INCO) could see long term gains as the story plays out.
SEE: The Fab Five: South Africa Joins BRIC

The Bottom Line 
When Jim O'Neil first came up with the acronym of BRIC, the four nations were the cream of the emerging market crop. A decade of fast growth later, the group has recently begun to stall. However, many of the same growth characteristics are in place and recent underperformance currently make the BRICs a bargain. For long-term investors, now could be the chance to add the four horsemen to a portfolio.

At the time of writing, Aaron Levitt did not own shares in any of the funds or companies mentioned in this article.

Related Articles
  1. Economics

    Understanding The Risk In The BRICs

    The BRICs offer much in the way of portfolio and economic growth, however, there are some pretty big risks for individual investors.
  2. Personal Finance

    Potholes In The Golden BRIC Road

    The BRIC countries offer amazing opportunities for growth and investment success, but investors should not overlook the significant challenges that lie beneath.
  3. Investing

    The Fab Five: South Africa Joins BRIC

    South Africa's inclusion in BRIC is considered premature by some, but there could be a method to the madness.
  4. Markets

    Forget BRIC, It's Time For CIVETS

    BRIC was the emerging market shorthand for the first decade, now it's time for CIVETS.
  5. Mutual Funds & ETFs

    Understanding BRIC Investments

    Brazil, Russia, India and China are becoming more popular for investing, but there is still plenty of risk among BRIC countries.
  6. Mutual Funds & ETFs

    7 Best ETF Trading Strategies for Beginners

    Exchange-traded funds are ideal instruments for beginning traders and investors. Learn the seven best strategies for trading ETFs.
  7. Economics

    Four Emerging Markets Economies Poised for Growth

    Which emerging market economies will soon make the leap to a developed economy? Here are four to watch.
  8. Mutual Funds & ETFs

    ETF Analysis: SPDR Dow Jones International RelEst

    Learn how the SPDR Dow Jones International Real Estate exchange-traded fund (ETF) is managed and for whom the ETF is most appropriate.
  9. Mutual Funds & ETFs

    ETF Analysis: iShares JPMorgan USD Emerg Markets Bond

    Learn about the iShares JPMorgan USD Emerging Markets Bond fund, which invests in bonds of sovereign and quasi-sovereign entities from emerging markets.
  10. Active Trading Fundamentals

    How Hedge Funds Front-Run Index Funds to Profit

    Understand what front running is, and learn how hedge funds use this investing strategy to profit from the anticipated stock buys of index funds.
  1. Equity

    The value of an asset less the value of all liabilities on that ...
  2. Exchange-Traded Fund (ETF)

    A security that tracks an index, a commodity or a basket of assets ...
  3. Brazil, Russia, India And China ...

    An acronym for the economies of Brazil, Russia, India and China ...
  4. Caribbean Community and Common ...

    The Caribbean Community and Common Market (CARICOM) is a common ...
  5. Caribbean Development Bank (CDB)

    The Caribbean Development Bank (CDB) is a multilateral financial ...
  6. Exchange-Traded Mutual Funds (ETMF)

    Investopedia explains the definition of exchange-traded mutual ...
  1. What is the difference between called-up share capital and paid-up share capital?

    The difference between called-up share capital and paid-up share capital is investors have already paid in full for paid-up ... Read Full Answer >>
  2. Why would a corporation issue convertible bonds?

    A convertible bond represents a hybrid security that has bond and equity features; this type of bond allows the conversion ... Read Full Answer >>
  3. What does a high turnover ratio signify for an investment fund?

    If an investment fund has a high turnover ratio, it indicates it replaces most or all of its holdings over a one-year period. ... Read Full Answer >>
  4. Does index trading increase market vulnerability?

    The rise of index trading may increase the overall vulnerability of the stock market due to increased correlations between ... Read Full Answer >>
  5. How does additional paid in capital affect retained earnings?

    Both additional paid-in capital and retained earnings are entries under the shareholders' equity section of a company's balance ... Read Full Answer >>
  6. What types of capital are not considered share capital?

    The money a business uses to fund operations or growth is called capital, and there are a number of capital sources available. ... Read Full Answer >>

You May Also Like

Trading Center

You are using adblocking software

Want access to all of Investopedia? Add us to your “whitelist”
so you'll never miss a feature!